Test Prep For AP® Courses
Which of the following scenarios would be classified as an inflow (increase) in the United States’ current account?
- A U.S. investor buys stock in an American company.
- The U.S. imports automobiles from Japan.
- A Japanese firm sells computers to an American company.
- A U.S. investor earns income on capital invested in a European company.
- Immigrants in the United States send money back to their home countries.
The trade balance is currently +$100, private savings is equal to $1,000, and domestic investment is equal to $600. What does public savings (i.e., the government budget balance) equal?
Suppose private savings in Country A is equal to domestic investment. If Country A runs a trade deficit, which of the following is most likely to be true?
- The country’s interest rate will decline.
- Tax revenues will increase.
- Country A’s currency will depreciate.
- Country A’s government will run a budget deficit.
- Crowding out will be prevented.