1. 1.In the U.S. current account, most of the trade deficit results from an excess of imported
A. mechandise
B. Services
C. transfer
2. If a country wants to prevent its exhange rate from falling, it could...
Solution
1.In the U.S. current account, most of the trade deficit results from an excess of imported
Correct Answer:
A. mechandise
Explanation:
Imported merchandise compensaters for deficit in US GDP. The deficit increased to 2.6 percent
of current-dollar gross domestic product (GDP) from 2.2 percent in the third quarter. The
increase in the current-account deficit was primarily accounted for by a decrease in the surplus
on primary income. In addition, the deficits on goods and secondary income increased.
Source of above explanation :
http://www.bea.gov/newsreleases/international/transactions/transnewsrelease.htm
2.
To prevent exchange rate from falling, Country should take following initiatives:
a. Lowering inflation
b. Reducing import and increasing export
c. Trade surplus
d. Bring in Investment so that demand of local currency will be increased.