AP Macroeconomics Practice Quiz: Balance of Payments Accounts

Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026

Test your understanding with short quizzes. This quiz has 14 questions to check your progress.

Question 1 of 14

What is the primary purpose of the balance of payments (BOP) as an accounting system?

A)To measure a country's annual government budget deficit or surplus.B)To record a country’s international transactions for a particular time period.C)To determine the exchange rate between two currencies.D)To track the total value of a country's domestic production.

All Questions (14)

What is the primary purpose of the balance of payments (BOP) as an accounting system?

A) To measure a country's annual government budget deficit or surplus.

B) To record a country’s international transactions for a particular time period.

C) To determine the exchange rate between two currencies.

D) To track the total value of a country's domestic production.

Correct Answer: B

According to the provided text, 'The balance of payments (BOP) is an accounting system that records a country’s international transactions for a particular time period.'

Which of the following is a component of a country's current account (CA)?

A) Purchase of foreign stocks by a domestic citizen.

B) Sale of domestic government bonds to a foreign central bank.

C) Net exports of goods and services.

D) Financial capital transfers.

Correct Answer: C

The provided content states that 'The current account (CA) records net exports, net income from abroad, and net unilateral transfers.' The other options are related to the purchase and sale of assets, which are part of the capital and financial account (CFA).

A transaction that causes money to flow into a country from abroad is recorded as a:

A) Credit to its BOP account.

B) Debit to its BOP account.

C) Surplus in its current account.

D) Deficit in its capital and financial account.

Correct Answer: A

The text explicitly states, 'Any transaction that causes money to flow into a country is a credit to its BOP account, and any transaction that causes money to flow out is a debit.'

A U.S. corporation purchases a factory in Mexico. In the U.S. balance of payments, this transaction is recorded in the:

A) Current account as a credit.

B) Current account as a debit.

C) Capital and financial account as a credit.

D) Capital and financial account as a debit.

Correct Answer: D

The purchase of an asset (the factory) is recorded in the capital and financial account (CFA). Since money is flowing out of the U.S. to make the purchase, it is recorded as a debit.

If U.S. consumers increase their purchases of imported electronics from South Korea, how will this affect the U.S. current account, ceteris paribus?

A) The current account balance will move toward surplus.

B) The current account balance will move toward deficit.

C) The capital and financial account balance will move toward deficit.

D) There will be no change in the current account balance.

Correct Answer: B

Increased imports represent an outflow of money, which is a debit in the current account. This causes the current account balance to decrease, thus moving it toward a deficit or increasing an existing deficit.

If a country has a current account deficit, which of the following must be true for its balance of payments?

A) It must also have a capital and financial account deficit.

B) Its net exports must be positive.

C) It must have a capital and financial account surplus.

D) The balance of payments will be negative.

Correct Answer: C

The balance of payments must sum to zero (CA + CFA = 0). Therefore, if the current account (CA) is negative (a deficit), the capital and financial account (CFA) must be positive (a surplus) by an equal amount to balance it.

A surplus in a country's capital and financial account (CFA) indicates that:

A) The country's exports are greater than its imports.

B) There is a net financial capital outflow from the country.

C) The country's residents are buying more foreign assets than foreigners are buying of the country's assets.

D) There is a net financial capital inflow into the country.

Correct Answer: D

The provided text states that the CFA 'may show a surplus (financial capital inflow)'. This means that the amount of money flowing into the country for the purchase of assets is greater than the amount flowing out.

Which of the following transactions would be recorded as a credit in the U.S. capital and financial account?

A) A U.S. citizen sends $100 to a relative in Italy.

B) A U.S. company exports wheat to Russia.

C) A French company buys shares of stock in a U.S. corporation.

D) A U.S. tourist spends money on vacation in Japan.

Correct Answer: C

The purchase of a U.S. asset (stock) by a foreign entity (French company) causes money to flow into the U.S. This is a financial capital inflow, recorded as a credit in the capital and financial account. Options A, B, and D are all current account transactions.

A country's current account has a surplus of $250 billion. According to the balance of payments identity, what is the balance of its capital and financial account?

A) A surplus of $250 billion.

B) A deficit of $250 billion.

C) Zero.

D) Cannot be determined without knowing net exports.

Correct Answer: B

The balance of payments identity is CA + CFA = 0. If the current account (CA) is +$250 billion, the capital and financial account (CFA) must be -$250 billion (a deficit) for the sum to be zero.

Given the following data for a nation: Exports = $500B, Imports = $400B, Net income from abroad = -$20B, Net unilateral transfers = -$30B. What is the nation's balance on its current account?

A) A surplus of $150 billion.

B) A surplus of $50 billion.

C) A deficit of $50 billion.

D) A deficit of $100 billion.

Correct Answer: B

The current account balance is calculated as (Net Exports) + (Net Income from Abroad) + (Net Unilateral Transfers). Net Exports = $500B - $400B = +$100B. The calculation is: (+$100B) + (-$20B) + (-$30B) = +$50B, which is a surplus of $50 billion.

A country's international transactions include: Foreign purchases of domestic assets = $400B, and Domestic purchases of foreign assets = $250B. Assuming these are the only transactions in this account, what is the balance on the capital and financial account?

A) A deficit of $150 billion.

B) A surplus of $150 billion.

C) A deficit of $650 billion.

D) A surplus of $650 billion.

Correct Answer: B

The balance on the capital and financial account is the value of inflows (credits) minus the value of outflows (debits). Foreign purchases of domestic assets are an inflow of $400B. Domestic purchases of foreign assets are an outflow of $250B. The balance is $400B - $250B = +$150B, which is a surplus.

The balance of trade is a part of which larger account in the balance of payments?

A) The capital and financial account

B) The current account

C) Net unilateral transfers

D) The official reserves account

Correct Answer: B

The provided text states, 'A nation’s balance of trade (i.e., net exports) is part of the current account...'

The accounting identity CA + CFA = 0 implies that:

A) A country's total exports must always equal its total imports.

B) A country cannot run a trade deficit for more than one year.

C) A current account deficit must be financed by a net inflow of capital.

D) A government's budget must be balanced.

Correct Answer: C

The identity means that if the current account is negative (a deficit, meaning the country spends more abroad than it earns), it must be offset by a positive capital and financial account (a surplus). A CFA surplus represents a net inflow of capital, which finances the CA deficit.

A country has a current account deficit. Which of the following transactions would reduce the magnitude of this deficit?

A) Domestic firms increase their imports of foreign raw materials.

B) The government increases its foreign aid payments to other nations.

C) Foreign tourists increase their spending within the country.

D) Domestic investors increase their purchases of foreign bonds.

Correct Answer: C

A current account deficit means debits are greater than credits. To reduce the deficit, credits must increase or debits must decrease. Spending by foreign tourists is considered an export of services, which is a credit to the current account. This would increase the CA balance, thereby reducing the deficit. Options A, B, and D are all debits to the CA (A, B) or CFA (D) and would not reduce the CA deficit.