1. All else being equal, an increase a country's national income tends to decrease its balance of trade. T/F

2. Assume that the US government increases its tariffs on imported steel. All else being equal, which of the following would occur?

a. The US BOT would decrease.

b. The US BOT would increase.

c. The US BOT would be unaffected by the change.

d. Cannot be determined

3. Suppose that the yen/pound exchange rate on 1/1/2015 was 120/pound. One month later, the rate was 115/pound. If the J-curve theory holds, which of the following situations would occur, all else being equal? a. Britian's BOT would initially improve, and then gradually worsen. b. Japan's BOT would initially worsen, and then gradually improve. c. Britian's BOT would initially worsen, and then gradually improve d. The balance of trade for both nations would be unaffected. 4. There is an inverse relationship between changes in a domestic country's inflation rate and its demand for foreign produced goods. T/F 5. The US typically sells more services to the rest of the world than it purchases from the rest of the world. T/F