"The Balance of Payments Must Balance

question 186

Multiple Choice

"The balance of payments must balance." This means that:

• A) a deficit in either the current or capital account must be offset by an equal surplus in the other account.
• B) income inflows must equal income outflows.
• C) imports always equal exports.
• D) net transfers equal the trade balance.

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Definitions:

Commercial Applicability

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Expected-Rate-of-Return Curve

A graphical representation showing the expected return on investment for varying levels of risk or different scenarios.

Interest-Rate Cost-of-Funds Curve

A graphical representation showing the relationship between the cost of funds for financial institutions and the interest rates over different periods.

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