8) Which of the following is a credit item in the US balance of payments? a) US

Question

8) Which of the following is a credit item in the US balance of payments? a) US imports of BMWs. b) Robby G. sending money back home to Austria. c) Foreigners using American airlines. d) An increase in US foreign exchange reserves. e) A U.S. bank loan to Brazil. 9) A currency is likely to depreciate for all of the following reasons except if its country has a) a relatively higher interest rate compared to elsewhere. b) a relatively higher inflation rate than its major trading partners. c) relatively faster economic growth than its major trading partners, impacting its trade bala d) growing political instability. e) slowing productivity gains. 10) When a country's currency is priced against a trade-weighted basket of its key partners currencies, we call this: a) nominal exchange rate (ER). b) real ER. c) cross ER. d) fixed ER. e) effective ER 4maito mavimum each)

Explanation / Answer

Answer 8:

Option c. Foreigners using American airlines will pay the money in dollars and thus it will be added as credit item in U.S. Balance of Payment.

Answer 9:

Option a. If a country has relatively higher interest rate as compared to others then the currency of the country will appreciate as returns on foreign investment will be high which will increase the demand of currency and thus the currency will appreciate.

Answer 10:

Option B. It is called as real exchange rate of the country.

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