In the Two-Period SOE Model, If the Current Account Surplus

question 50

Multiple Choice

In the two-period SOE model, if the current account surplus is initially positive and the real interest rate decreases, then

• A)the current account surplus must fall.
• B)the current account deficit must rise.
• C)the current account surplus must rise.
• D)the current account deficit may rise or fall.
• E)the current account deficit must fall.

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Definitions:

Consolidated Financial Statements

Financial statements that show the combined financial position and results of operations of a parent company and its subsidiaries.

Combined Reporting

A method used in corporate taxation that combines the tax reports of related companies into one comprehensive report.

Corporation

A legal entity that is separate and distinct from its owners, capable of owning assets, incurring debts, and entering into contracts.

Bond Investment Transactions

A financial activity involving the buying or selling of bonds, which are debt securities issued by entities to raise funds.