Jane has just sent a gift that was made in the U.S. to her relatives in Italy. As far as the balance of payments is concerned this gift will
A. be part of the current account as a unilateral transfer.
B. be considered an export since it has left the U.S.
C. be part of the capital account since the gift is a physical item.
D. have no influence on the balance of payments since it was made in the U.S.
Answer: A
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In the HO model, the production possibility frontier is bowed out due to the assumption of
A) identical tastes. B) different factor intensities in the production of the two goods. C) increasing returns to scale. D) Two of the above.
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What will be an ideal response?
Suppose the economy is suffering in a recessionary period. Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead. What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?