Which of the Following Is TRUE

question 45

Multiple Choice

Which of the following is TRUE?

• A) A country with a current account surplus is earning more from its exports than it spends on imports.
• B) A country could finance a current account deficit by using previously accumulated foreign wealth to pay for its imports.
• C) A country with a current account deficit must be increasing its net foreign debts by the amount of the deficit.
• D) We can describe the current account surplus as the difference between income and absorption.
• E) All of the above are true of current account balances.

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Definitions:

Price Level

The overall current average price of goods and services within the economic framework.

Real GDP

Gross Domestic Product adjusted for inflation, reflecting the value of all goods and services produced by an economy in a given year at constant prices.

Short Run

A period in which at least one input is fixed, and only some of the production inputs can be varied.

Aggregate Demand

Cumulative interest in goods and services within an economic structure, evaluated at a particular comprehensive price level over a specific duration.