The Most Effective Way to Reduce Our Current Account Deficit

question 104

Multiple Choice

The most effective way to reduce our current account deficit would be to

• A)lower our service trade deficit.
• B)lower our merchandise trade deficit.
• C)raise our capital account surplus.
• D)lower our capital account surplus.

---

Definitions:

Chen, Roll, Ross

Refers to a model or theory in financial economics developed by the researchers Chen, Roll, and Ross, typically associated with their work on the arbitrage pricing theory or factor models.

Multifactor Models

Financial models that evaluate assets by taking into account multiple economic and statistical factors to explain market phenomena and asset returns.

Risk-free Rate

The anticipated earnings on an investment considered free from financial risk, usually related to sovereign bonds.

Arbitrage Opportunity

This refers to the chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another, realizing a profit without risk.