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© 2014 Pearson Canada Inc.#
Because it provides some indication of what is happening to Canadian claims on foreign
wealth and the demand for imports and exports, the ____ is closely followed by economists
wanting information on the future movement of exchange rates.
A) trade balance
B) capital account
C) current account balance
D) statistical discrepancy
Answer: C
Diff: 2 Type: MC Page Ref: 496 - 497
Skill: Recall
Objective List: 20.2 Discuss international financial transactions and the balance of payments
Economists closely follow the current account balance because they believe it can provide
information on the future movement of ____.
A) interest rates
B) gold flows
C) exchange rates
D) special drawing rights
Answer: C
Diff: 2 Type: MC Page Ref: 497
Skill: Recall
Objective List: 20.2 Discuss international financial transactions and the balance of payments
What is the current account? Why does the current account receive so much attention from
economists?
Answer: The current account shows international transactions that involve currently produced
goods and services. The current account tells us whether Canada (private sector and government
combined) is increasing or decreasing its claims on foreign wealth. A surplus indicates that
Canada is increasing its claims on foreign wealth, and is thus increasing its holdings of foreign
capital, and a deficit indicates that Canada is reducing its holdings of foreign capital and foreign
countries are increasing their claims on Canada.
Diff: 3 Type: SA Page Ref: 496 - 497
Skill: Recall
Objective List: 20.2 Discuss international financial transactions and the balance of payments