Test Prep For AP® Courses


Which of the following scenarios would be classified as an inflow (increase) in the United States’ current account?

  1. A U.S. investor buys stock in an American company.
  2. The U.S. imports automobiles from Japan.
  3. A Japanese firm sells computers to an American company.
  4. A U.S. investor earns income on capital invested in a European company.
  5. 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?

  1. –$600
  2. –$300
  3. $100
  4. $600
  5. $1,000

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?

  1. The country’s interest rate will decline.
  2. Tax revenues will increase.
  3. Country A’s currency will depreciate.
  4. Country A’s government will run a budget deficit.
  5. Crowding out will be prevented.