Practice Questions
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What is the primary purpose of the capital account in the balance of payments?
The capital account tracks money that changes ownership of assets. Other options are incorrect because Some might think the capital account records go...
Which of the following best describes how a country can adjust its trade balance when facing a deficit?
To fix a trade deficit, a country should sell more goods to other countries and buy fewer goods from them. Other options are incorrect because This op...
How do net exports influence a country's balance of payments when there is a trade deficit?
When a country has a trade deficit, it means it imports more than it exports. Other options are incorrect because This answer suggests that increasing...
How do changes in the capital account influence net exports in the context of economic policy adjustments?
When the capital account surplus increases, it means more money is coming into the country. Other options are incorrect because Some might think that ...
How do exchange rate adjustments impact the balance of trade within the context of economic policy adjustments?
When a country's currency gets weaker, its goods become cheaper for other countries. Other options are incorrect because Some might think that changin...
What does the balance of payments primarily reflect in an economy?
The balance of payments shows how much money comes in and goes out of a country. Other options are incorrect because Some might think this measures go...
What does the current account in the balance of payments primarily measure?
The current account tracks how much a country sells to others and how much it buys. Other options are incorrect because Some might think the current a...
What is the primary purpose of the capital account in the balance of payments?
The capital account tracks money that changes ownership of assets. Other options are incorrect because Some might think this account records goods and...
Current Account : Capital Account :: Trade Deficit : ?
When a country has a trade deficit, it buys more from other countries than it sells. Other options are incorrect because A trade surplus means selling...
Arrange the following steps in the correct order to illustrate the adjustments needed in the balance of payments when a country's net exports decrease.
When a country sells less to other countries, its current account goes down. Other options are incorrect because Some might think that the capital acc...
If a country's net exports decline significantly, which of the following adjustments is most likely to occur in its balance of payments?
When net exports go down, the country sells less to other countries. Other options are incorrect because Some might think that a decline in exports me...
If a country's net exports decrease, what must happen to maintain the balance of payments?
When net exports go down, it means the country is selling less to other countries. Other options are incorrect because Some might think that the curre...
If a country's net exports decrease significantly, what is the most likely underlying cause for the subsequent adjustments in its capital and financial account?
When net exports go down, it means the country is selling less to other countries. Other options are incorrect because Some might think that less trad...
When a country's net exports decrease, this typically results in a decrease in the current account, which requires a corresponding increase in the __________ to maintain balance.
When net exports go down, the country earns less from selling goods abroad. Other options are incorrect because Some might think the trade balance is ...
Which of the following statements are true regarding the adjustments in the balance of payments when net exports decrease? Select all that apply.
When net exports decrease, it affects the balance of payments in ways not shown in the options. Other options are incorrect because This suggests that...
A country experiences a decrease in net exports due to a global economic downturn. Which of the following adjustments is most likely to occur in the balance of payments to maintain equilibrium?
When a country sells less to other countries, it can lose money. Other options are incorrect because Cutting government spending does not directly fix...
A country is experiencing a significant decrease in its net exports due to reduced demand for its goods abroad. How should the country adjust its balance of payments to maintain overall economic stability?
When exports go down, the country can bring in more money through investments. Other options are incorrect because Some might think that lowering inve...
Master Balance of Payments Adjustments
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