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D. portfolio theory

15. The brain drain refers to transfer of:

A. technology from developed to developing nations

B. skilled labor and professionals from developed to developing nations C. unskilled labor from developing to developed nations

*D. skilled labor and professionals from less advanced to more advanced nations Chapter 13: The Balance of Payments Multiple-choice Questions: 1. Which of the following is false?

A. A credit transaction leads to a payment from foreigners B. A debit transaction leads to a payment to foreigners *C. A credit transaction is entered with a negative sign

D. Double-entry bookkeeping refers to each transaction entered twice.

2. Which of the following is a debit? A. The export of goods B. The export of services

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*C. Unilateral transfers given to foreigners D. Capital inflows

3. Capital inflows:

A. refer to an increase in foreign assets in the nation B. refer to a reduction in the nation's assets abroad C. lead to a payment from foreigners *D. all of the above

4. When a U.S. firm imports goods to be paid in three months the U.S. credits: A. the current account B. unilateral transfers *C. capital D. official reserves

5. The receipt of an interest payment on a loan made by a U.S. commercial bank to a foreign resident is entered in the U.S. balance of payments as a: A. credit in the capital account

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*B. credit in the current account C. credit in official reserves D. debit in unilateral transfers

6. The payment of a dividend by an American company to a foreign stockholder represents:

A. a debit in the U.S. capital account B. a credit in the U.S. capital account C. a credit in the U.S. official reserve account *D. a debit in the U.S. current account

7. When a U.S. firm imports a good from England a pays for it by drawing on its pound

sterling balances in a London Bank, the U.S. debits its current account and credits its:

A. official reserve account B. unilateral transfers account C. services in its current account

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*D. capital account

8. When the U.S. ships food aid to a developing nation, the U.S. debits: *A. unilateral transfers B. services C. capital D. official reserves

9. When the resident of a foreign nation (1) sells a U.S. stock and (2) deposits the proceeds in a U.S. bank, the U.S.:

A. credits capital for (1) and debits capital for (2) B. credits the current account and debits capital C. debits capital and credits official reserves *D. debits capital for (1) and credits capital for (2)

10. When a U.S. resident (1) purchases foreign treasury bills and pays by (2) drawing down his bank balances abroad, the U.S.:

A. debits short-term capital and credits official reserves

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