Governments Prefer to Avoid Excessive Current Account Surpluses Because

question 7

Multiple Choice

Governments prefer to avoid excessive current account surpluses because

• A) the returns to domestic savings are more difficult to tax than those on assets abroad.
• B) an addition to the home capital stock may increase domestic unemployment and therefore lead to higher national income.
• C) foreign investment in one firm may have beneficial technological spillover effects on other foreign producers that the investing firm does not capture.
• D) an addition to the home capital stock may reduce domestic unemployment and therefore lead to higher national income.
• E) domestic savings increase with more investment abroad.

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Definitions:

Standard Cost System

An accounting method that applies fixed costs for materials, labor, and overhead to goods produced based on standard prices and usage rates.

Cost of Goods Sold

The total direct costs attributable to the production of goods sold by a company, including materials and labor.

Fixed Overhead

Regular, consistent expenses associated with operating a business such as rent, utilities, and insurance that do not vary with production volume.

Direct Labor

The wages and benefits paid to workers who are directly involved in the production of goods or the provision of services.