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Practice mode Balance of Payments, Aid and Foreign Investment

Which items are included in a country’s balance on current account?

Correct answer D. Goods, services and unilateral transfers

Explanation

The current account records trade in goods and services, income flows and unilateral transfers such as remittances and grants. Investment and loan flows belong to the capital and financial account.

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Question 02 Balance of Payments, Aid and Foreign Investment

Which of the following is commonly cited as a benefit that MNCs can bring to a developing country?

Correct answer B. Helping to finance a savings gap or balance of payments deficit

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Critics argue that MNCs harm developing countries because they: I. increase technological dependence on foreign sources; II. hamper local entrepreneurship and infant industries; III. raise unemployment through unsuitable technology; IV. restrict subsidiary exports that undercut the parent. Which are cited?

Correct answer C. All of I, II, III and IV

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Question 04 Balance of Payments, Aid and Foreign Investment

How do Carmen Reinhart and Kenneth Rogoff explain the paradox of capital flowing from poor to rich countries?

Correct answer C. The role of political and credit-market risk in many LDCs

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