Question

6. The balance of payments is ..-(A) negative when the nation runs a trade deficit. (B) positive when the nation runs a trade surplus. (C) negative when the country is a borrower in the international apital market. (D) positive when the country is a lender in the international capital market. (E) always equal to zero. 7. If the U.S. dollar increases in value relative to the British pound, (A) U.S. wheat will become cheaper in England. (3) British bicycles will become cheaper in the United States. (C) British bicycles will become more expensive in the United States. (D) German cars will become cheaper in the United States. (E) there is no change in prices.

Answer 1

As per Chegg's policy, i am answering only the first four MCQs.

Answer 6

Option e) Always equal to zero.

Reason: Since the balance of payment is based upon system of double-entry book-keeping, the total debits must equal to total credits. In this accounting sense, balances of payments for a country must always balance.

Answer 7

Option b) British cycles will become cheaper in the United States.

Reason: When the currency of a country appreciates, the foreign goods become cheaper.

Answer 8

Option a) The United States begins to import rice to make up for a domestic shortage

Reason: When the market is competitve and there is free trade allowed, the domestic price must become equal to the world price. Hence, when the domestic price is higher, there would be more imports from the world, and ultimately domestic price would fall.

Answer 9

Option d) More US dollars are being sent abroad than foreign currencies are being sent to the United States

Reason: A current account deficit occurs when a country spends more on imports than it receives on exports.