demianu for the currency 6. All else held constant, an increase in U.S. imports
ID: 2438951 • Letter: D
Question
demianu for the currency 6. All else held constant, an increase in U.S. imports will cause the U.S. current account to: O move in a positive direction. O move in a negative direction. O remain unchanged. O become more volatile. 7. Those who say the growing current account defict in the United States is a significant problem make the argument that O the United States is financing current expenditures by borrowing from foreigners and these debts wil will ultimately have to be paid off O the United States is investing too much in other countries and not enough domestically. O the large current account deficit will only lead to a depreciation of the U.S. dollar, hence hurt domestic exporters. O lower investment in the United States as a result of the current account deficit will ultimately lead to decreases in wealth and economic growth in the United States 8. If the United States has a capital account surplus, the current account: @ must be falling. O must be in surplus. O must be balanced. O must be in deficit. 9. An exchange rate system in which the government or central bank has agreed to convert its currency into another at a fixed rate is called a: Ofloating exchange rate. O fixed exchange rate. O managed float O forced market rate.Explanation / Answer
Q6)
Answer: 2nd option
Current account is the aggregate of trade balance (export – import), earning from abroad, and net transfer. Increasing import decreases the current account balance; therefore, it has a negative move.
Q7)
Answer: 1st option
The deficit could be met by taking loan, which creates repayment burden.
Q8)
Answer: 1st option
There is an inverse relationship between capital account and current account; if one has surplus the other must be declining.
Q9)
Answer: 2nd option
This is called fixed exchange rate, since the rate becomes constant.
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