If a Country Must Make a Net Payment to Foreigners

question 96

Multiple Choice

If a country must make a net payment to foreigners because of a balance-of-payments deficit, the country should

• A)either increase its official reserve assets or borrow anew from foreigners.
• B)either run down its official reserve assets or borrow anew from foreigners.
• C)either run down its official reserve assets or lend more foreigners.
• D)none of the above

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Definitions:

Salvage Value

The forecasted worth of an asset upon reaching the end of its utility.

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the central bank's discount window.

Depreciable Equipment

Tangible assets used in production or operations that are written off over their useful lives due to wear and tear or obsolescence.

Salvage Value

Salvage value is the estimated resale value of an asset at the end of its useful life, relevant in depreciation calculations.