65. As a mathematical truism, a country’s current account deficit must equal: (a) its capital account...

65. As a mathematical truism, a country’s current account deficit must equal: (a) its capital account surplus; (b) its nominal GDP; (c) the level of its imports; (d) its central government’s budget deficit.

66. If a country is labelled “a debtor nation;” (a) it has a high level of consumer debt, such as credit card debt; (b) the value of its assets abroad is less than the value of assets in that country owned by foreigners; (c) it is not operating in accordance with its comparative advantage; (d) its monetary policy clearly is too tight.

67. Which of the following is the best definition of “the trough of an economic cycle?” (a) the peak of economic activity; (b) a period during which monetary policy is neither contractionary nor expansionary; (c) a turning point in the cycle between recession and recovery; (d) a period of monetary neutrality.

68. A period during which the sustained growth in aggregate demand exceeds the sustained growth in aggregate supply likely will result in: (a) demand pull inflation; (b) rapid onset of recession; (c) heteroskedasticity in forecasting model error terms; (d) an increase in the U-3 unemployment rate.

Expert Solution

Ans-65)( a) Capital account surplus.

Reason-: current account and capital account are the components of BOP. The sum of current account and the capital account will always be zero in BOP. This means a deficit in current account must have same amount of surplus in capital account to cancel out the balance and reach a value of zero.

Ans-66) (b) value of its assets in abroad is less than the value of assets in that country owned by foreigners.

Reason-: Debtor nation is a nation that has a negative net investment after recording all transactions it has done worldwide. The above statement also shows a negative investment as it has invested less than others.

Ans-67) (c) turning point in the cycle between recession and recovery.

Ans-68) (a) demand pull inflation .

Reason -: when AD exceeds AS , it leads to increase in prices due to high demand and less supply . This high demand is responsible to pull the prices up and is called demand pull inflation.

Rahul Sunny answered 2 years ago

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