If Net Interest and Net Transfers Are $0, and a Nation's

question 240

Multiple Choice

If net interest and net transfers are $0, and a nation's purchases of foreign goods and services are $3.5 billion while its sales of goods and services to foreigners are $4.5 billion

• A) it has a $1 billion surplus in its balance of payments.
• B) it has a $1 billion deficit in its current account.
• C) it has a $1 billion surplus in its current account.
• D) its capital and financial account shows a surplus.

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Definitions:

Covariance

A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means they vary inversely.

Variance

A measure of the dispersion of a random variable. Equals the expected value of the squared deviation from the mean.

Fairly-Priced Securities

Securities that are believed to be priced appropriately according to their risk level and the expected rate of return.

Positive Betas

A term referring to financial securities that have a beta greater than zero, indicating that their returns generally move in the same direction as the market.