If there are no changes in official reserves, the current account deficit must b
ID: 1207488 • Letter: I
Question
If there are no changes in official reserves, the current account deficit must be Select one greater than the capital account deficit equal to the capital account deficit greater than the capital account surplus equal to the capital account surplus An increase in the growth rate of the money supply in the short run causes of the domestic currency and aggregate demand Select one appreciation, increase depreciation, decrease appreciation, decrease depreciation, increase Which of the following would be recorded as a debit in the U. S. current account? Select one Untied Slates exports $5 million in corn to Canada British financial investments in the United States pay higher dividends American citizens go to sub-Saharan Africa to teach reading to round students The United States States buys $1 million in British government bonds Import trade tends to domestic quantity of a good exchanged Select one have an indeterminate effect on hold constant decrease increaseExplanation / Answer
Answer 1:
Option D. If the deficit in the current account is not covered by the surplus in the capital account, the changes in official reserves are undertaken. In this case. there are no changes in the official reserves, thus, deficit in the capital account is covered by the surplus in the capital account.
Answer 2:
Increase in the growth rate of money supply will lead to decline in domestic rate of interest and will make foreign bonds more attractive and thus lead to depreciation of domestic currency. This will lead to increase in net exports and shift the AD curve to the right.Thus, Option d.
Answer 3:
Option c.
Answer 4:
Option c. Import trade leads to decline in the domestic quantity of goods exchanged. as domestic goods will be replaced by imports.