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Question 1

Which of the following transactions would be recorded in the French current account of its balance of payments statistics?

a) A French resident buys a Volkswagen car produced in Wolfsburg, Germany.

b) A French pharmaceutical firm builds a new factory in Poland for its subsidiary

c) A French national living in Switzerland buys a house in Switzerland.

d) A French bank sells an Italian bond to another French bank.

Question 2

Which of the following national economic accounting identities is correct for national accounts that include a private sector, a government sector, and a foreign sector?

a) (S-I) +(T-G)+(X-Z)=0

b) (S-I) +(X-Z)=(T-G)

c) (S-I) +(T-G)=(X-Z)

d) (S-I) =(T-G)+(X-Z)

Question 3

By "absorption" economists mean…

a) …the difference between disposable personal income and household consumption.

b) … total domestic spending by households, firms and governments on goods and services, both domestic and foreign.

c) … the resources that ?rms set aside to replace used equipment and generally to strengthen their ?nancial position.

d) … aggregate real savings.

Question 4

Real GDP is a measure of a country's…

a) …wealth.

b) …money.

c) …economic transactions.

d) …physical output.

Question 5

An increase in the nominal of GDP by 6% can correspond to…

a) …a decrease of real GDP by 4% and an increase of prices by 10%.

b) …an increase of real GDP by 9% and an increase of prices by 3%.

c) …an increase of real GDP by 5% and a decrease of prices by 1%.

d) …a decrease in real GDP by 3% and an increase of prices by 3%.

Question 6

Suppose the current account is in deficit and the private financial account is balanced, then…

a) …either the country's exchange rate will depreciate or its monetary authorities will sell some of its foreign exchange reserves.

b) …either the country's exchange rate will appreciate or its monetary authorities will sell some of its foreign exchange reserves.

c) …either the country's exchange rate will depreciate or its monetary authorities increase its foreign exchange reserves.

d) …either the country's exchange rate will appreciate or its monetary authorities increase its foreign exchange reserves.

Question 7

Which of the following is NOT an example of a transfer payment in the sense of the national income accounts?

a) Government family allowances

b) Public unemployment insurance benefits

c) Dividends paid by corporations to stockholders

d) Disability pensions paid from the social insurance system

Question 8

Which of the following is NOT a leakage from the circular flow of income and expenditure?

a) Imports

b) Government purchases

c) Taxes net of government transfers

d) Saving

Oxford University Press, Online Resource Centre, Chapter 02.

Chapter 02

Instructions