1. All else being equal, an increase a country\'s national income tends to decre
ID: 1171869 • Letter: 1
Question
1. All else being equal, an increase a country's national income tends to decrease its balance of trade. T/F
2. Assume that the US government increases its tariffs on imported steel. All else being equal, which of the following would occur?
a. The US BOT would decrease.
b. The US BOT would increase.
c. The US BOT would be unaffected by the change.
d. Cannot be determined
3. Suppose that the yen/pound exchange rate on 1/1/2015 was ¥120/pound. One month later, the rate was ¥115/pound. If the J-curve theory holds, which of the following situations would occur, all else being equal?
a. Britian's BOT would initially improve, and then gradually worsen.
b. Japan's BOT would initially worsen, and then gradually improve.
c. Britian's BOT would initially worsen, and then gradually improve
d. The balance of trade for both nations would be unaffected.
4. There is an inverse relationship between changes in a domestic country's inflation rate and its demand for foreign produced goods. T/F
5. The US typically sells more services to the rest of the world than it purchases from the rest of the world. T/F
3. Suppose that the yen/pound exchange rate on 1/1/2015 was ¥120/pound. One month later, the rate was ¥115/pound. If the J-curve theory holds, which of the following situations would occur, all else being equal?
a. Britian's BOT would initially improve, and then gradually worsen.
b. Japan's BOT would initially worsen, and then gradually improve.
c. Britian's BOT would initially worsen, and then gradually improve
d. The balance of trade for both nations would be unaffected.
4. There is an inverse relationship between changes in a domestic country's inflation rate and its demand for foreign produced goods. T/F
5. The US typically sells more services to the rest of the world than it purchases from the rest of the world. T/F
Explanation / Answer
1) An increase in national income increases the disposable income which increases imports.
Thus the balance of trade should increase. False
2) The US BOT should decrease.
3)c. Britian's BOT would initially worsen, and then gradually improve
4) Increased inflation lead to depreciation in currency which lead to rise in exports and less of imports. True
5) False
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.