Suppose a Portuguese Citizen Travels to Tanzania to Go on a Safari

question 151

Multiple Choice

Suppose a Portuguese citizen travels to Tanzania to go on a safari and uses euros for the transaction. Tanzania then uses the euros to purchase wine from Portugal. How will this transaction affect Portugal's trade deficit?

• A) The first transaction is recorded as an import in the current account. The second transaction is recorded as an export in the current account, so the trade deficit will not change.
• B) The first transaction is recorded as an export in the current account. The second transaction is recorded as an import in the current account, so the trade deficit will not change.
• C) The first transaction is recorded as an export in the current account. The second transaction is also recorded as an export in the current account, so the trade deficit will shrink.
• D) The first transaction is recorded as an import in the current account. The second transaction is also recorded as an import in the current account, so the trade deficit will grow.
• E) The trade deficit will be unaffected because each of these transactions affects the capital account.

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Definitions:

Relationships Between Parts

The way in which components or elements of a system interact with each other to form a cohesive whole.

Degree of Complexity

A metric that quantifies the intricacy and difficulty of a project or system, often considering variables like size, diversity, and interdependencies.

Additive Rule

A principle in probability that states the total probability of the union of mutually exclusive events is equal to the sum of their individual probabilities.

Intersection

An operation in set theory whereby only the elements that are common to all sets are included in the outcome.