A budget surplus occurs when tax revenues are greater than government expenditures.

A principal reason that purchasing power parity does not hold exactly in practice is

A) that foreign and domestic assets are not perfect substitutes. B) the existence of non-traded goods. C) that consumers in different countries have different preferences. D) that costs of production are not the same in all countries.

Which of the following is not a factor explaining how deficits on current account develop?

a. high interest rates b. budgetary deficits c. negative balance of payments d. low productivity e. the country's popularity because of the strength and stability of its economy