What are the major components of the current account in the balance of payments? How is the current account balance determined?
What will be an ideal response?
The current account shows the position of the United States in terms of trade in goods and services. Two major components of this account are U.S. goods exports and imports. The difference between these two components gives the balance on goods. Two other components are U.S. exports and imports of services. The difference between these two components gives the balance on services, which is added to the balance on goods to give the balance on goods and services. The fifth component is net investment income. It shows excess of interest and dividend payments foreigners paid to U.S. individuals or companies for the services of U.S. exported capital over what the U.S. paid to foreign individuals or companies. The sixth item is net transfer payments. This is the difference between U.S. public and private transfer payments to the rest of the world and foreign private and public transfer payments to the United States. Adding net investment income and net transfer payments to the balance on goods and services gives the balance on the current account.
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An increase in disposable income
A. decreases consumption because it shifts the consumption schedule downward. B. increases consumption because it shifts the consumption schedule upward. C. increases consumption by moving upward along a given consumption schedule. D. decreases consumption by moving downward along a given consumption schedule.
The above figure shows a perfectly competitive firm. If the market price is more than $20 per unit, the firm
A) will definitely shut down to minimize its losses. B) will stay open to produce and will make zero economic profit. C) will stay open to produce and will incur an economic loss. D) will stay open to produce and will make an economic profit. E) might shut down but more information is needed about the fixed cost.
Refer to Table 7-6. With trade, what is the total gain in belt production?
A) 20 B) 40 C) 60 D) 120
Efficiency wage theory suggests that firms may hold wages above the market clearing rate because
A. unspoken agreements between workers and firms are in place. B. they believe that the productivity of workers increases with the wage rate. C. long-term contracts fix wage rates for a period of one to three years. D. it is required by law that they do so.