The balance on goods and services is the same as the balance on the current account
a. True
b. False
Indicate whether the statement is true or false
False
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Imagine you own a machine that produces perfectly authentic and legal $100 bills. You would use this machine until:
a. the bills became worthless. b. the total cost began to fall. c. the marginal cost was $100. d. the variable cost began to rise. e. the marginal revenue began to fall.
The metaphor used to describe the working of the price system to achieve efficiency in a free market is
a. Occam's razor. b. the prisoner's dilemma. c. the invisible hand. d. the benefit principle.
Answer the following statements true (T) or false (F)
1) A system of fixed exchange rates is more likely to result in exchange controls than is a system of flexible (floating) exchange rates. 2) A nation that imports more goods and services than it exports is necessarily realizing an international balance of payments deficit. 3) The United States has had significant trade and current account surpluses in recent years. 4) A current account deficit will reduce U.S. foreign indebtedness.
Suppose a basket of internationally traded goods that sells for $10,000 in the United States sells for €8,000 in the euro zone. According to purchasing power parity theory, the equilibrium exchange rate should be
a. $2.50 per euro b. $1.50 per euro c. $1.25 per euro d. $1.00 per euro e. $.50 per euro