The Balance of Payments Is Zero

question 20

Multiple Choice

The balance of payments is zero

• A)only if the capital account balance is zero.
• B)only if the current account balance is zero.
• C)because market forces ensure that this is so.
• D)if the capital inflows equal capital outflows.
• E)because each transaction has equal and opposite entries in the accounts.

Understand the roles of taxes and government spending in fiscal policy.

Recognize the impact of automatic stabilizers on the economy.

Grasp the concepts of budget deficits, surpluses, and their implications.

Understand the impact of fiscal policy on employment and economic gaps.

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Definitions:

Scrap Value

The estimated resale value of an asset at the end of its useful life, typically in a condition where it can only be sold for parts or raw materials.

Probabilities

The measure of the likelihood that an event will occur, expressed as a number between 0 and 1.

Coin Toss

A simple randomness procedure used to decide between two equally probable outcomes with the flip of a coin.

Expected Value

The predicted value of a variable, calculated as the sum of all possible values each multiplied by the probability of its occurrence.