What are the three categories of transactions in the balance of payments? Give an example of each
The current account includes records of trade of goods and services, investment income, and unilateral transfers. The purchase of American machinery by a foreign firm is recorded here. The capital account records changes in the ownership of real and financial assets. The sale of IBM stock to a foreign investor is recorded here. The official reserve account records changes in currency holdings of the central bank. If the United States reduces its currency holdings by supplying foreign currency to the foreign exchange market, this transaction is recorded in the official reserve account.
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An increase in the real rate of interest that can be earned on U.S. investments above the rate that can be earned on investments in India would:
a. increase the price of the dollar in Indian rupees. b. increase the supply of dollars by those holding U.S. dollars. c. decrease the equilibrium exchange rate of Indian rupees per dollar. d. all of these.
The term time inconsistency is used to describe:
A. people's inability to make choices today that determine their actions in the future. B. people's inability to correctly predict how their current choices will affect them in the future. C. a situation in which we regret choices we make simply because of when we made the choice. D. a situation in which we change our minds about what we want simply because of the timing of the decision.