MacroEcon_L03_Problems

VEE Macroeconomics Practice Problems 2023 Learning Objective 3 Problems (1) An American imports a “God Save the Queen” t-shirt from the U.K. What is this an example of? (A) Internal trade (B) International trade (C) Bilateral trade (D) Unilateral trade (2) What does the Balance of Payments (BOP) record the economic activity of? (A) Residents of two countries (B) Residents of a particular country and the rest of the world (C) The entire world (D) None of the above (3) What is the most comprehensive description of the Balance of Payments? (A) All flows of currency in and out of an economy (B) The value of trade in imports and exports, transfers, investment flows and investment income (C) The value of trade in imports and exports (D) The value of trade in imports, exports, transfers and investment income (4) Which of the following is an invisible export? (A) Foreign remittances (B) Income from tourists (C) Internet charges (D) All of the above © 2023 The Infinite Actuary, LLC Page 1

VEE Macroeconomics Practice Problems 2023 (5) GeneriTech , a Rwandan tech company, has created a new kind of processor architecture that is much more efficient than our current processors. How would this affect U.S.-based processor companies? (A) It would not affect them because their processors occupy too much market share for this innovation to make a difference (B) U.S. companies would try to buy out GeneriTech and integrate their technology into their processors (C) It would force U.S. companies to work on making their processors more efficient so that computer manufacturers do not start using GeneriTech processors (D) U.S. companies would work together with GeneriTech to mass-produce these processors (6) The demand for Bosnian oil goes up dramatically due to several trade agreements between other oil nations falling through. Assuming their current account’s net value was 0 in 2021, what is this likely to do to their current account? (A) Create a surplus (B) Create a deficit (C) Nothing (D) Indeterminate based on information given (7) If Germany gives aid to Myanmar, what part of the Balance of Payments will record it? (A) Visible balance within the current account (B) Invisible balance within the current account (C) Financial account (D) Capital account (8) Calculate the current account balance of the following economy. Balance of Payment Item Exports , millions Imports , millions Trade in goods $ 110 $ 150 Trade in services $ 80 $ 60 Income $ 95 $ 80 Current transfers $ 10 $ 5 (A) - $ 25 million (B) - $ 20 million (C) $ 0 (D) + $ 20 million © 2023 The Infinite Actuary, LLC Page 2