Governments Prefer to Avoid Excessive Current Account Surpluses Because

question 7

Multiple Choice

Governments prefer to avoid excessive current account surpluses because

• A) the returns to domestic savings are more difficult to tax than those on assets abroad.
• B) an addition to the home capital stock may increase domestic unemployment and therefore lead to higher national income.
• C) foreign investment in one firm may have beneficial technological spillover effects on other foreign producers that the investing firm does not capture.
• D) an addition to the home capital stock may reduce domestic unemployment and therefore lead to higher national income.
• E) domestic savings increase with more investment abroad.

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Definitions:

British Invasion

A cultural phenomenon in the 1960s when rock and pop music acts from the United Kingdom became popular in the United States.

Canada

A country in North America known for its vast landscapes, multicultural cities, and as a member of the Commonwealth with a parliamentary system.

South Carolina

A state in the southeastern United States known for its shores, historical significance, and role in both the American Revolution and Civil War.

African Slaves

People from Africa who were forcibly transported to the New World and sold into chattel slavery, primarily between the 16th and 19th centuries.