210 ❯ Step 5. Build Your Test-Taking Confidence
- A—A difference in relative prices affects the
exchange rate between the dollar and the euro.
European customers will see U.S. goods as rela-
tively less expensive and increase their purchases
from the United States, thus appreciating the
dollar and depreciating the euro. - B—This defines a budget surplus.
- A—In the balance of payments statement, the
capital account shows the flow of currency in
physical and financial assets.
59. C—Import quotas protect domestic producers
at the expense of the higher price paid by con-
sumers.
60. E—Because an injection of dollars into the
circular flow goes through the economy several
times, the impact on real GDP is multiplied.