Question

In: Economics

A current account surplus means A) Canadian spending on imports from R.O.W. is greater than R.O.W....

A current account surplus means

A) Canadian spending on imports from R.O.W. is greater than R.O.W. spending on Canadian exports.

B) R.O.W. spending on Canadian exports is greater than Canadian spending on imports from R.O.W.

C) Canadian investments in R.O.W. are greater than R.O.W. investments in Canada.

D) R.O.W. investments in Canada are greater than Canadian investments in R.O.W.

E) there is also a capital account surplus.

A current account deficit means

A) Canadian spending on imports from R.O.W. is greater than R.O.W. spending on Canadian exports.

B) R.O.W. spending on Canadian exports is greater than Canadian spending on imports from R.O.W.

C) Canadian investments in R.O.W. are greater than R.O.W. investments in Canada.

D) R.O.W. investments in Canada are greater than Canadian investments in R.O.W.

E) there is also a capital account deficit.

The Bank of Canada's price stability goal is keeping the

A) price level stable.

B) unemployment rate low at any cost.

C) inflation rate low at any cost.

D) inflation rate at zero so it does not significantly affect people's economic decisions.

E) inflation rate low enough so it does not significantly affect people's economic decisions.

Expert Solution

1. B) R.O.W. spending on Canadian exports is greater than Canadian spending on imports from R.O.W.

Current account surplus means that receipts from exports exceed the expenditure on imports. Thus option b is correct.

Option c,d and e are incorrect since current account surplus does not include investments. Investments are a part of capital account.

2. A) Canadian spending on imports from R.O.W. is greater than R.O.W. spending on Canadian exports.

Current account deficit means that the expenditure on imports exceeds the receipts from exports. Thus option a is correct.

Option c,d and e are incorrect since current account surplus does not include investments. Investments are a part of capital account.

3. E) inflation rate low enough so it does not significantly affect people's economic decisions.

A monetary policy is aimed at promoting price stability and harnessing the benefits of low inflation. A credible commitment by the central bank is to keeping inflation low and stable provides a climate conducive to sound economic decisions.

Rahul Sunny answered 2 years ago

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