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.

---

Definitions:

Economic Impact

The effect of an event, policy, or business activity on the economy of a specific area, ranging from local to global.

Per-apple Tax

A unit tax applied specifically to the sale of apples, affecting their market price per unit.

Imported Apples

Apples that are brought into one country from another to be sold in the domestic market.

United States

A country located in North America, comprising 50 states, a federal district, and several territories, known for its diverse geography and multicultural population.