22 Questions
What is the primary purpose of Balance of Payments accounting?
To record all transactions between a country and the rest of the world during a specific time period
Which type of transaction would involve the export of jeans from the UK to France?
Current account
What would be recorded as a debit in the Balance of Payments?
Payment to foreigners
What type of asset would be recorded in the financial account?
Bonds
What is the primary distinction between the current account and the financial account?
The current account records transactions involving goods and services, while the financial account records transactions involving financial assets
What type of transaction would involve the transfer of copyrights between countries?
Capital account
What is the component of the monetary base that is not in the coffers of the banks themselves?
MB p
What does the consolidated banking sector's lending, LG + L, represent?
Total domestic credit to the economy
What is the result of subtracting the part of the monetary base that is in the coffers of the banks themselves from the total monetary base?
MB - MB b
What is the relationship between MB and MB b?
MB b is a subset of MB
What is the term for the total credit extended to the domestic economy by the consolidated banking sector?
Domestic Credit
What is the component of the monetary base that is held by the Central Bank?
MB b
What is the result of adding the foreign exchange reserves and the net lending to the domestic economy?
FX + LG + L
What is the term for the total deposits made by the public in the banking sector?
Deposits
What is the net change in foreign official reserves?
$35.6 bn increase
What is the significance of the $35.6 bn variation in official reserves?
It covers the US current account deficit
What is the relationship between the Central Bank's foreign exchange reserves and the monetary base?
An increase in foreign exchange reserves leads to an increase in the monetary base
What is the purpose of the Central Bank's lending to the government?
To finance government expenditure
What is the role of commercial banks in the money creation process?
They are the primary creators of money
What is the impact of a decrease in foreign official reserves on the monetary base?
It would lead to a decrease in the monetary base
What is the relationship between the current account and the balance of payments?
The current account is a component of the balance of payments
What is the significance of the Central Bank's balance sheet?
It reflects the monetary policy of the Central Bank
Study Notes
Money Supply in an Open Economy
- The consolidated banking sector's lending (LG + L) represents the total domestic credit to the economy.
- MB (monetary base) consists of currency (MBb) and deposits with the Central Bank, and D represents deposits by the public.
- The Central Bank's balance sheet has assets (FX, LG, and MB) and liabilities (MB), with FX being Gold and Foreign currency reserves.
Commercial Banks' Balance Sheet
- Commercial Banks' balance sheet has assets (B - MBb) and liabilities (D), with B being the bank's balance and D being deposits.
Balance of Payments Accounting
- Records all transactions between a country and the rest of the world during a time period.
- Transactions are categorized into:
- Current Account (CA): goods and services (e.g., exports and imports).
- Financial Account (F A): financial assets (e.g., money, factories, bonds).
- Capital Account (KA): transfers of wealth between countries (non-market activities, e.g., copyrights).
Foreign Reserves
- Official reserves increased by $35.9 billion (foreign Central Banks increased their reserves).
- US official reserves (international reserves held by the Central Bank) rose by $0.3 billion.
- Variation in official reserves is $35.6 billion, covering the US current deficit.
This quiz covers concepts related to e-commerce, liability, and consumer rights. It includes questions about payment methods, refunds, and responsibilities.
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