In a floating exchange rate system, the capital account balance equals the negative of the current account balance.
Answer the following statement true (T) or false (F)
True
This is because countries that run trade surpluses are able to use the surplus to purchase assets in other countries.
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Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will
a. increase the supply of corn. b. increase the supply of soybeans. c. decrease the supply of soybeans. d. decrease the supply of corn. e. have no effect on the supplies of corn and soybeans.
Imagine that the stock market crashes, interest rates plummet, and inflation soars. Considering this, what would most likely be the attitude of banks about giving out loans?
a. somewhat open b. very open c. somewhat hesitant d. very hesitant
Which of the following equations describes a trade surplus?
a. G < C b. X > M c. X > I d. C < M
Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. If these two countries specialize and trade according to their comparative advantage
A. all individuals in both countries will benefit. B. Greece will specialize in and export cars. C. Germany will produce more cars than in the absence of trade. D. Germany will produce more fish than in the absence of trade.