Why must the current account and the financial account sum to zero? (Assume the capital account is zero.)
What will be an ideal response?
The current account and the financial account must sum to zero because any excess demand for foreign currency that arises from transactions in goods and services (the current account) must be met by an excess supply of foreign currency arising from asset transactions (the financial account). A current account deficit is offset by a financial account surplus and vice versa.
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Use the following graph to answer the next question.
In the figure, AD2 and AS2 represent the original aggregate supply and demand curves. If Q3 is full-employment output, then AD1 and AS2 represent a(n) ________.
A. full-employment B. expansion C. price stability D. recession
Explain why the marginal cost curve intersects a U-shaped average cost curve at its minimum point
What will be an ideal response?
Suppose Mexico has a comparative advantage relative to the United States in the manufacture of clothing and the United States has a comparative advantage in producing agricultural products. Which of the following is most likely to occur?
A) Mexico and the United States will not trade agricultural products or clothing. B) Mexico will sell clothing to the United States and the United States will sell agricultural products to Mexico. C) Mexico will sell agricultural products to the United States and Mexico will buy clothing from the United States. D) Mexico will sell clothing to the United States but not buy any agricultural products from the United States.
How does the short-run equilibrium of a monopolistic competitor differ from a monopolist? How does it differ from a perfect competitor?
What will be an ideal response?