In a Small Open Economy, If Exports Equal $5 Billion

question 62

Multiple Choice

In a small open economy, if exports equal $5 billion and imports equal $7 billion, then there is a trade ______ and ______ net capital outflow.

• A) deficit; negative
• B) surplus; negative
• C) deficit; positive
• D) surplus; positive

Understand the concept of purchasing-power parity and its application to exchange rates.

Comprehend the definitions and components of a country's trade balance, including exports, imports, trade surplus, and trade deficit.

Grasp the fundamentals of net exports and their implications on a country's economy.

Distinguish between nominal and real exchange rates and their computations.

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Definitions:

Convergent Thinking

A problem-solving technique that involves focusing on a finite number of solutions rather than proposing multiple possibilities.

Creative Intelligence

A facet of intelligence related to the ability to deal with new situations using creative and innovative solutions and imaginative problem-solving.

Divergent Thinking

A cognitive process that involves generating creative ideas by exploring many possible solutions.

Hereditary Studies

Research into how characteristics and conditions are transmitted from parents to offspring through genes.