A country which incurs a current account deficit will most likely have a financial or capital account surplus

AC is lower in the long run than in the short run because

a. prices often fall, allowing savings on purchases. b. inputs can be combined more efficiently in the long run. c. over time the prices of all inputs tend to decrease. d. AFC falls with output over all ranges of output.

According to the adaptive expectations hypothesis, people will

a. anticipate that what has happened in the immediate past will continue. b. systematically overestimate inflation when inflation is increasing. c. use all available information, including information on the expected impact of economic policy, when they formulate expectations about economic events. d. systematically underestimate inflation when inflation is declining.