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If the United States Has a Current Account Deficit with England

question 58

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If the United States has a current account deficit with England of $1 million,and the Bank of England sells $1 million worth of pounds in the foreign exchange market,then England ________ $1 million of international reserves and its monetary base ________ by $1 million.


Definitions:

Investment

The allocation of resources, usually money, in expectation of generating income or profit.

Interest

The cost of borrowing money, usually represented as a percentage of the principal loan amount.

Loan

An amount of money that is lent to someone, which is expected to be paid back with interest.

Interest

The cost of borrowing money, typically expressed as an annual percentage of the principal amount.

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