If the Current Account Balance Is Negative, Net Interest Is

question 36

Multiple Choice

If the current account balance is negative, net interest is $100 billion and net transfers are -$100 billion, then

• A) imports exceed exports.
• B) the official settlements account must be negative.
• C) real GDP exceeds potential GDP.
• D) the official settlements account must be positive.
• E) exports exceed imports.

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Definitions:

Fixed Set-Up Costs

Initial costs that do not vary with the level of production or sales, such as equipment purchases or facility leases, needing to be paid before production starts.

Economies of Scale

The savings businesses gain from operating at a larger scale, where the expense for each unit produced diminishes as the scale enlarges.

Short Run

A period in which at least one input in the production process is fixed, limiting the ability of a firm to adjust to changes in market demand.

Long Run

An economic term referring to a period during which all factors of production and costs are variable, allowing for full adjustment to changes.