When the nation of Ectenia opens itself to world trade in coffee beans, the domestic price of coffee beans falls. Which of the following describes the situation?
a. Domestic production of coffee falls, and Ectenia becomes a coffee importer.
b. Domestic production of coffee rises, and Ectenia becomes a coffee importer.
c. Domestic production of coffee falls, and Ectenia becomes a coffee exporter.
d. Domestic production of coffee rises, and Ectenia becomes a coffee exporter.
Answer: a. Domestic production of coffee falls, and Ectenia becomes a coffee importer.
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The equilibrium price is sometimes called the:
A. market-clearing price. B. maximum price. C. optimum price. D. quantity-clearing price.
When the price level is low and the demand for domestic goods increases, how does it affect international trade?
A) Prices of all international goods will increase. B) Prices of all international goods will decrease. C) Net exports will decrease. D) Net exports will increase.
The country of Pimm exports $500 billion worth of goods and services and imports $400 billion worth of goods and services. Net interest income paid abroad is $50 billion and net transfers are $0. The current account balance is ________
A) $50 billion B) $100 billion C) $150 billion D) $975 billion
________ is necessary to "balance" the BOP statement
A) Reserve inflow B) Statistical discrepancy C) Debit transaction D) Credit transaction