If Equilibrium Is Present in the Foreign Exchange Market and a Nation

question 178

Multiple Choice

If equilibrium is present in the foreign exchange market and a nation is experiencing a trade deficit,

• A) the nation must be experiencing a net capital inflow.
• B) the nation must be experiencing a net capital outflow.
• C) the nation's inflation rate must increase.
• D) the nation's interest rate must increase.

---

Definitions:

Assets

Resources owned by a business or individual that have economic value and can be converted into cash.

Liabilities

Financial obligations or debts that an entity owes to another party, which must be settled over time through the transfer of economic benefits.

Net Worth

The total value of an individual's or entity's assets minus their liabilities.

Total Value

The aggregate worth of a good, service, product, or other item as perceived by its users.