1. The U.S. trade balances in May and June 2018 were -$43.2 billion and -$46.3 billion. a. Over this period, what happened to the following? 1) Domestic investment and domestic savings 2) Foreign savings b. How are the following Balance of Payments accounts affected by these U.S. trade imbalances? 1) Current account 2) Capital/financial account 3) Official reserve transactions6. Trade deficit and the currency depreciation Which approach to the relationship between exchange rates and the trade balance predicts that a currency depreciation will temporarily improve a nation's balance-of-payments and international reserves? O The elasticity approach 0 The monetary approach A The absorption approach Question 08. Given the following utility function and budget constraint, determine the optimal consumption bundle and draw it on the graph below. (Hint: Assume interior solution-not a corner solution). u(X1, X2) = X1"x2""", where a = I = PIXI + pzxz, where I = $1000, p1 = $5 and pz = $10 X2 X13. A US company pays interest for $30,000 matured on its bonds held by a German investor. The payment is in Dollars. The German investor sells the Dollars to the European Central Bank (official institution). How do you record this transaction in the US Balance of Payments? Current Account $30,000 Financial Account (Non-official) (a) Financial Account (Official) $30.000 Current Account Financial Account (Non-official) (b) $30.000 $30,000 Financial Account (Official) Current Account $30.000 Financial Account (Non-official) (c) Financial Account (Official) $30,000 Current Account Financial Account (Non-official) (d) $30,000 Financial Account (Official) $30,000 3Which of the following is FALSE about the Pecking Order Hypothesis? O A. Debt financing is less expensive than equity financing. O B. Firms which are most profitable will have a lot of debt in their capital structure. O C. Firms prefer internal financing first. O D. If external financing is required, firms will use equity as a last resort. O E. If external financing is required, firms should first seek debt financing