6. Suppose that an Austrian buys a car from Germany with cash. For Germany, this

Question

6. Suppose that an Austrian buys a car from Germany with cash. For Germany, this counts as a: (a) current account credit, financial account debit (b) current account debit, financial account credit. (c) current account debit, capital account credit. (d) current account credit, financial account credit 7. If one nation experiences a gain in its external wealth due to valuation effects only, combined, the other nations in the world will experience (a) an equal gain since all currencies are worth more (b) no change in external wealth (c) an equal decline in external wealth (d) an increase in the interest they earn 8. In 2009, U.S. liabilities were dollar-denominated corporate and official debt for the most part while U.S. external assets were mostly equities, bank loans, government debt, and foreign direct investment, denominated in foreign currencies. When the dollar fell in the wake of the financial crisis, what net effect was there on U.S. external wealth? (a) No change occurred because the change in currency value affects everything equally (b) External wealth rose since the value of liabilities was already in dollars and changed little, but assets denominated in foreign currencies increased in value (c) External wealth declined since the dollar fell and US assets were not worth as much d) External wealth declined since the weak dollar forced the US to default on loans

Explanation / Answer

Ans

B is right. Imports mean current account debit since it is purchase of good from other country.

2 equal decline in external wealth as appreciation of one means depreciation of other

3 B is right. Assets are in Foreign currencies. Since they appreciated relative to dollar, assets increased in value.

100% right answer Please please like answer

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