Explain the three categories of balance of payments transactions
What will be an ideal response?
Current account transactions relate to sales and purchases of goods and services. These include goods, services, and unilateral transfers. The capital account consists of transactions involving financial assets. If there are no official reserve transactions, the sum of the current account and the capital account is zero. Official reserve transactions involve payments or receipts of official reserves by the government. If the United States is running a deficit so that foreigners are turning dollars in for reserves, the official reserves of the government will decrease.
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Which of the following goods is likely to have the lowest price elasticity of demand?
A) Life-saving drugs B) Potato chips C) Chocolates D) Decorative flowers
Which of the following will occur if the federal government runs a budget deficit?
A)The expenditure multiplier will increase B) The size of the national debt will increase C) The economy's output will decrease D) State government will run a budget surplus to offset the federal deficit E) Interest rates will tend to decline