1. Which of the following statements correctly explains why investment is negatively related to the real interest rate?

a. Investment and savings are not equal when the interest rate is flexible.

b. Firms invest more when the marginal efficiency of capital is less than the real interest rate.

c. A low interest rate makes investment ventures more profitable.

d. Consumers save more of their income when interest rates are high.

2. Which of the following are included in the Balance of Payments (BOP)?

I. Balance on current account.

II. Balance of Goods and Services Account.

III. Capital Account Balance.

IV. Official Reserve Settlement Balance.

a. I, II and III.

b. III and IV.

c. I, II and IV.

d. All of the above are parts of BOP

3. The income that residents in the United States receive from their foreign investments is registered as a ______________.

a. Debit in the current account only.

b. Credit in the current account only.

c. Credit in the capital account only.

d. Debit in the current account only.

4. Which of the following would be registered as a debit on the current account of the United States' Balance of Payments?

a. Brazilian farms buy equipment from a U.S. company that manufactures farm equipment.

b. Foreign tourists spend money in Washington D.C.

c. A broadcasting company from the United Stated sells its programming to France.

d. The U.S company imports an engine from a German firm.