Suppose the Current Account of a Country Is Initially in Balance

question 109

Multiple Choice

Suppose the current account of a country is initially in balance. A new transaction occurs so that the current account is now in surplus. Official reserve balance is maintained before and after the transaction occurs. From this, we know that

• A)the balance of trade is now in surplus.
• B)the balance of goods and services is now in surplus.
• C)the capital account is now in deficit.
• D)the government must make official reserve transactions.

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Definitions:

Safety Stock

Extra inventory kept on hand to protect against stockouts caused by variations in supply and demand.

Service Level

A measure of the quality of service provided to customers, often quantified as the percentage of customer demands met on time.

Lead Time

The total time it takes to complete a process from start to finish, often measured from the initiation to the delivery of a product or service.

Optimal Order Size

The ideal quantity of inventory to order that minimizes the total costs associated with ordering, carrying, and stockouts.