Chapter 5: National and International Accounts: Income, Wealth, and the Balance of Payments

Question 1

National Income and Product Accounts

Answer 1

Where a closed economy measures and records economic activity

Question 2

Balance of Payments Accounts

Answer 2

Where an open economy measures and records economic activity

Question 3

Gross National Expenditure (GNE)

Answer 3

Total expenditure on final goods and services by home entities in any given period of measurement, made up of three parts: personal consumption (C), investment (I), and government spending (G).
GNE = C + I + G
GNE is an expenditure measure

Question 4

Gross Domestic Product (GDP)

Answer 4

The value of all (intermediate and final) goods and services produced as output by firms, minus the value of all goods and services purchased as inputs by firms.
GDP = C + I + G + TB
In a closed economy, GDP = GNE because TB = 0

Question 5

Gross National Income (GNI)

Answer 5

Total income resources of the economy

Question 6

Trade Balance (TB)

Answer 6

The difference between payments made for imports and payments received for exports.

Question 7

Net Factor Income from Abroad (NFIA)

Answer 7

Value of factor service exports minus factor service imports

Question 8

Net Unilateral Transfers (NUT)

Answer 8

The value of unilateral transfers the country receives from the rest of the world minus those it gives to the rest of the world

Question 9

Gross National Disposable Income (GNDI)

Answer 9

Total income resources available to the home country

Question 10

Current Account (CA)

Answer 10

Tally of all international transactions in goods, services, and income

Question 11

Financial Account (FA)

Answer 11

Value of asset exports minus asset imports

Question 12

Capital Account (KA)

Answer 12

Value of capital transfers from the rest of the world minus those to the rest of the world

Question 13

National Income Identity

Answer 13

Y = C + I + G + CA

Tells us that the current account represents the difference between national income Y and GNE

Question 14

Current Account Identity

Answer 14

S =Y - C - G = I + CA

Question 15

Government (Public) Saving

Answer 15

Difference between tax revenue T received by the government and government purchases G

Question 16

External Asset

Answer 16

A claim on a foreign country

Question 17

External Liability

Answer 17

A foreign country’s claim on you

Question 18

BOP Identity

Answer 18

CA + FA + KA = 0

It does actually balance

Question 19

BOP Credit

Answer 19

Six types of transactions are payment credits:

For the Current Account:

1. Exports of goods and services (+EX)
2. Exports of factor services (+EX(fs))
3. Unilateral transfers received (+UT(in))

For the Capital Account:
4. Capital transfers received (+KA(in))

For the Financial Account:
5,6. Exports of home and foreign assets (+EX(ha), +EX(fa))

Question 20

BOP Debit

Answer 20

Six types of transactions are payment debits:

For the Current Account:

1. Imports of goods and services (-IM)
2. Imports of factor services (-IM(fs))
3. Unilateral transfers given (-UT(out))

For the Capital Account:
4. Capital transfers given (-KA(out))

For the Financial Account:
5,6. Imports of home and foreign assets (-IM(ha), -IM(fa))

Question 21

Net Lender

Answer 21

A country that has a current account surplus

Question 22

Net Borrower

Answer 22

A country that has a current account deficit

Question 23

Net Creditor

Answer 23

A country whose external assets exceed its external liabilities

Question 24

Net Debtor

Answer 24

A country whose external liabilities exceed its external assets

Question 25

External Wealth

Answer 25

The value of total external assets minus the value of total external liabilities