When There Is a Current Account Deficit and the Reserve

question 3

Multiple Choice

When there is a current account deficit and the reserve assets account equals 0, then

• A)the country has a budget surplus.
• B)exports exceed imports for the country.
• C)the country is an exporter of capital.
• D)the capital and financial account has a surplus.

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Definitions:

Strips And Straps

Options strategies that involve combining puts and calls with the same expiration date but different strike prices to profit from movements in the underlying asset's price.

Straddles

An investment strategy that involves purchasing both a call and put option on the same asset with the same strike price and expiration date, used to bet on volatility without predicting direction.

Asian Call Option

A type of call option where the payoff depends on the average price of the underlying asset over a specified period rather than at maturity.

Underlying Asset

The financial asset upon which derivative contracts, such as options and futures, are based.