Which of the Following Statements Is INCORRECT

question 356

Multiple Choice

Which of the following statements is INCORRECT?

• A) A change in U.S. official reserves is recorded in the official settlements account.
• B) Foreign investment in the United States and U.S. investment abroad are recorded in the capital and financial account.
• C) Net interest income is recorded in the official settlements account.
• D) Payments for imports and receipts from exports are recorded in the current account.

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Definitions:

Wealth Effect

The change in spending and consumption patterns by individuals or households due to changes in their real or perceived wealth.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute away from more expensive goods towards cheaper ones.

Income Effect

The impact on consumer's choice arising from a change in their income, influencing their purchasing power.

Giffen Good

A type of inferior good for which demand increases as the price increases, violating the basic law of demand.