Brief introduction to the balance of payments account: Practice Questions

• a.debit ... current
• b.credit ... current
• c.credit ... capital and financial
• d.debit ... capital and financial

• a.

  As a debit in the goods account of the current account.

• b.

  As a credit in the services account of the current account.

• c.

  As a credit in the current transfers account.

• d.

  As a debit in the capital and financial account.

• a.

  A Credit of HK$50 million in the Financial Account, with the Current Account balance remaining unchanged.

• b.

  A Debit of HK$50 million in the Current Account and a Credit of HK$50 million in the Financial Account.

• c.

  A Credit of HK$50 million in the Current Account and a Debit of HK$50 million in the Financial Account.

• d.

  A Debit of HK$50 million in the Financial Account, with the Current Account balance remaining unchanged.

• a.

  The central bank will likely raise interest rates to attract more foreign capital.

• b.

  The central bank will be forced to draw down its official foreign reserves.

• c.

  The central bank will have to increase its foreign asset holdings.

• d.

  The central bank will need to sell domestic currency to stem its appreciation.

• a.

  An equivalent surplus in the capital account.

• b.

  An equivalent net inflow of capital, as reflected in the financial account, or a reduction in official foreign reserves.

• c.

  An increase in the country's net international investment position.

• d.

  An equivalent deficit in the financial account.

Write your answer out first, then check it against the worked solution.