In the balance of payments, which of the following is TRUE of the sum of the capital account balance, the current account balance, and the official reserve transactions account balance?
A. This sum is positive only if the U.S. government operates with a budget deficit.
B. This sum is either positive or negative, depending on whether the sum of all surplus and deficit items associated with cross-border transactions is positive or negative.
C. This sum is positive only if the U.S. government operates with a budget surplus.
D. This sum must always be zero, because the sum of all surplus and deficit items associated with cross-border transactions must equal zero.
Answer: D
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A) high employment; price stability B) interest rate stability; financial market stability C) rapid economic growth; low inflation D) interest rate stability; a balanced budget
In a perfectly competitive market,
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A. it makes no sense to engage in trade at all, and it makes sense to be self-sufficient. B. it makes sense to restrict imports of items that are of military significance in order to maintain a strong defense posture. C. it makes sense to threaten to protect markets unless other nations agree to open theirs. D. it makes no sense to export items of strategic importance to other nations, because they should make them on their own.