Global Financial Strategy: National Income Accounts & Balance of Payments

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In the national income accounting identity for an open economy, what does 𝐶 + 𝐼 represent?

Net foreign expenditure

Total domestic expenditure (correct)

Government spending

Exports

What happens to the current account and trade balance when a country exports more than it imports?

Current account < 0, trade balance < 0

Current account < 0, trade balance > 0

Current account > 0, trade balance > 0 (correct)

Current account > 0, trade balance < 0

Which factor contributes to national income through unilateral transfers?

Domestic consumption

Foreign investment

Government purchases

Pension payments from expatriate retirees (correct)

What does GDP measure?

The final value of all goods and services produced within a country Signup and view all the answers

If production exceeds domestic expenditure, which of the following statements is true?

Current account > 0 and trade balance > 0 Signup and view all the answers

What is the formula for net foreign wealth in an open economy?

$\text{Net foreign wealth} = \text{current account} - \text{trade balance}$ Signup and view all the answers

What does GDP equal to, based on the provided information?

GNP - Net income from foreign countries for factors of production Signup and view all the answers

Which component equals the country's net foreign investment?

Current Account Signup and view all the answers

Where do transactions of financial assets appear according to the provided text?

Financial Account Signup and view all the answers

What records flows of goods and services and flows of financial assets across countries?

Financial Account Signup and view all the answers

What are official international reserve assets a component of?

Financial Account Signup and view all the answers

What does the official settlements balance represent according to the text?

Central Bank's Holdings of Foreign Assets relative to Foreign Central Banks’ Holdings of Domestic Assets Signup and view all the answers

What does the National Income Accounts record?

Value of national income that results from production and expenditure Signup and view all the answers

In the context of Gross National Product (GNP), what are factors of production?

Resources used to produce goods and services Signup and view all the answers

How is national income defined?

Income earned by the factors of production Signup and view all the answers

What is Gross National Product (GNP) a measure of?

Value of final goods and services produced by a nation's factors of production Signup and view all the answers

What does the formula: Amount of expenditure by buyers = Amount of income for sellers = Value of production signify?

The equality between income earned and production value Signup and view all the answers

Which of the following is NOT considered a factor of production according to the text?

Money supply Signup and view all the answers

What is the impact on the balance of payments accounts when domestic assets are sold to foreigners?

Credit (+) Signup and view all the answers

Why are foreign assets purchased by domestic citizens considered a debit (-) in the balance of payments accounts?

Because the domestic economy gives up money during the transaction Signup and view all the answers

What is the purpose of the statistical discrepancy in the balance of payments accounts?

To adjust for differences in data sources Signup and view all the answers

Which institution is responsible for managing the supply of money in an economy?

Central bank Signup and view all the answers

What is one way central banks affect macroeconomic conditions through international reserves?

Buying or selling international reserves in private asset markets Signup and view all the answers

How can foreign exchange intervention by a central bank alter macroeconomic conditions?

By injecting or withdrawing money from circulation Signup and view all the answers

Global Financial Strategy: National Income Accounts & Balance of Payments

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Questions and Answers

In the national income accounting identity for an open economy, what does 𝐶 + 𝐼 represent?

What happens to the current account and trade balance when a country exports more than it imports?

Which factor contributes to national income through unilateral transfers?

What does GDP measure?

If production exceeds domestic expenditure, which of the following statements is true?

What is the formula for net foreign wealth in an open economy?

What does GDP equal to, based on the provided information?

Which component equals the country's net foreign investment?

Where do transactions of financial assets appear according to the provided text?

What records flows of goods and services and flows of financial assets across countries?

What are official international reserve assets a component of?

What does the official settlements balance represent according to the text?

What does the National Income Accounts record?

In the context of Gross National Product (GNP), what are factors of production?

How is national income defined?

What is Gross National Product (GNP) a measure of?

What does the formula: Amount of expenditure by buyers = Amount of income for sellers = Value of production signify?

Which of the following is NOT considered a factor of production according to the text?

What is the impact on the balance of payments accounts when domestic assets are sold to foreigners?

Why are foreign assets purchased by domestic citizens considered a debit (-) in the balance of payments accounts?

What is the purpose of the statistical discrepancy in the balance of payments accounts?

Which institution is responsible for managing the supply of money in an economy?

What is one way central banks affect macroeconomic conditions through international reserves?

How can foreign exchange intervention by a central bank alter macroeconomic conditions?

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