Which of the following must be considered when examining a nation's balance of payments?
A)Too much attention is placed on the balance of goods and on short-term data
B)International transactions are independent so that an attempt to reduce the US trade deficit with one nation doesn't affect the surplus the US has with another.
C)Measuring the deficit in the balance of payments is strictly correct under a flexible exchange rate system and not under a fixed exchange rate system.
D)If we have a deficit in the balance of payments,under the flexible exchange rate that will not bring any pressure on the currency value.

Question

Quizplus · Accepted Answer

Too much attention on the balance of goods and short-term data may lead to neglecting other important factors such as services, investment income, and transfers.

Answer: B 
 International transactions are interdependent, so attempting to reduce the trade deficit with one nation may affect the surplus the US has with another, due to factors such as exchange rates or trade policies.

Answer: C 
 Measuring the deficit in the balance of payments is not strictly correct under either exchange rate system, as there are various ways in which exchange rates can affect the balance of payments.

Answer: D 
 If a nation has a deficit in its balance of payments, under a flexible exchange rate system, that may lead to a devaluation of the currency, as there may be less demand for it on the foreign exchange market.

Which of the Following Must Be Considered When Examining a Nation's