When the Flow of Income into the United States Exceeds

question 2

Multiple Choice

When the flow of income into the United States exceeds the flow of income out of the United States, it creates a

• A) current account surplus
• B) current account deficit
• C) capital account surplus
• D) capital account deficit

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Definitions:

Money Income

Money income includes the total earnings received by an individual or household in the form of wages, salaries, benefits, and returns on investments over a period.

Substitution Effect

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

Marginal Utility

The added satisfaction or usefulness received from consuming one more unit of a good or service.

Total Utility

The total satisfaction received from consuming a certain amount or combination of goods and services.