Suppose the U.S. inflation rate falls while the inflation rate among the members of the European Monetary Union (EMU) holds constant. Other things equal, what will happen in the balance of payments accounts?
What will be an ideal response?
The lower inflation rate in the U.S. relative to the EMU makes U.S. goods and services a little cheaper, increasing exports and decreasing imports. The current account balance will improve.
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Suppose Target decided to lower the price on all shirts as part of its Back to School promotion. The cross elasticity of demand between pants and shirts is negative
Lowering the price on shirts will ________ the demand for pants because shirts and pants are ________. A) increase; substitutes B) decrease; substitutes C) increase; complements D) decrease; complements
Other things equal. an open market purchase of government securities by the Fed will not result in which of the following?
a. increased bond prices b. a reduced volume of loans issued by the commercial banking system c. decreased interest rates d. an increase in the price level
Most of the U.S. national debt is owed to
a. insurance companies. b. foreign and international institutions. c. private investors. d. Federal Reserve banks and government agencies.
Which of the following is the best definition of money?
A) Currency plus outstanding credit card balances. B) The outstanding credit debt of households and businesses. C) Anything that widely serves as a medium of exchange, unit of account, and store of value. D) Various types of paper notes and coinage backed by precious metals.