Name and describe the two key components of a balance of trade.
What will be an ideal response?
Answer:
Balance of trade: whether a country has a trade surplus or deficit
Exports: outflow of goods and services
Credit side
Foreign spending in domestic economy
Foreign investments in domestic economy
Imports: inflow of goods and services
Debit side
Domestic spending abroad
Domestic investments abroad
Foreign aid
If imports of a country exceed the exports, then there will be a trade deficit balance.
When exports exceed imports there will be a trade surplus.
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Given the proportion of a consumer’s income spent on various goods, the demand for is likely to be the most price inelastic.
If the utility for two goods "x" and "y" is measured as U = x + y, then it can be concluded that
A) "x" and "y" are perfect substitutes. B) "x" and "y" are perfect complements. C) "x" and "y" are both bads. D) the indifference curves on the x,y graph will be upward sloping.
Between 1960 and 1997, the federal budget was never in surplus
a. True b. False Indicate whether the statement is true or false
When a country experiences capital flight, which of the following rise?
a. its real interest rate and its real exchange rate b. its real interest rate but not its real exchange rate c. its real exchange rate but not its real interest rate d. neither its real interest rate nor its foreign exchange rate