Chapter 41, Problem 3MCQ

To determine

The correct option for the term previously used for the financial account.

Answer to Problem 3MCQ

Option b is correct.

Explanation of Solution

Explanation for the correct option:

b.

Financial accounts were previously known as capital accounts on the balance of payment. Therefore, option a is correct.

Explanation for incorrect options:

a.

Gross national product (GNP) refers to the term used for defining the values of goods and services instead of an account. Therefore, option a is incorrect.

c.

A trade deficit arises when there are more imports than exports. Therefore, option c is the incorrect answer.

d.

The net investment represents the difference between the assets purchased and the assets sold. Therefore, option d is incorrect.

e.

Trade balance represents the net international trade. It includes the difference between the country’s export and imports. Therefore, option e is incorrect.

Economics Concept Introduction

Balance of payment: Balance of payment is the recording of transactions that occur with one country and the rest of the world over a financial period. It records the trading of goods and services and transfers payments.