Suppose the current account of a country is initially in balance. A new transaction occurs so that the current account is now in surplus. Official reserve balance is maintained before and after the transaction occurs. From this, we know that
A) the balance of trade is now in surplus.
B) the balance of goods and services is now in surplus.
C) the capital account is now in deficit.
D) the government must make official reserve transactions.
C
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Assume that the central bank sells government securities in the open market. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real exchange rate and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium. Assume the nominal exchange rate is stated
as: (Foreign currency/ Domestic currency). a. The real exchange rate rises and monetary base rises. b. The real exchange rate rises and monetary base falls. c. The real exchange rate and monetary base fall. d. The real exchange rate and monetary base remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
The U.S. dollar has depreciated relative to the Japanese yen if it takes
A) fewer yen to buy a dollar. B) more yen to buy a dollar. C) more dollars to buy a yen. D) fewer dollars to buy a yen. E) a and c