A current account surplus

Question 10 options:

means the country should reduce its imports and increase its exports in order to avoid imbalances.

poses a problem because the country is borrowing funds from the rest of the world that it won't be able to pay back later.

may pose no problem if domestic savings are being invested more profitably abroad than they would be at home.

poses a problem if domestic savings are being invested more profitably abroad than they would be at home.

Which of the following is FALSE?

Question 16 options:

	An expenditure-switching policy induces an exchange rate adjustment and thus changes the direction of demand, shifting it between domestic output and imports.
	When the exchange rate, E, and the foreign price level, P*, is fixed, domestic inflation depends primarily on aggregate demand.
	A monetary policy is not a policy tool under fixed exchange rates
	A country with a current account surplus is a ripe candidate for currency devaluation.