CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Which of the following items is a credit in the U.S. balance of trade?
A. The sale of a life insurance policy to an Italian by an American company
B. The purchase of a German car by an American
C. A short-term loan extended to a South American by a U.S. resident
Explanation: The balance of payments is a summary of all economic transactions between a country and all other countries for a specific period of time. Transactions that create a demand for the nation's currency (or a supply of foreign currency) on the foreign exchange market are recorded as a credit or plus item. The only example of such an occurrence is when an Italian demands U.S. currency in order to purchase a life insurance policy from a U.S. company. He must pay for the policy in dollars and therefore supplies Euros to the market in exchange for U.S. dollars.

User Contributed Comments 0

You need to log in first to add your comment.