Global

Question 1

current account deficit

Answer 1

import value > export value

Question 2

current account surplus

Answer 2

export value > import value

Question 3

free trade area

Answer 3

all barriers to import and export of goods and services among member countries are removed

Question 4

customs union

Answer 4

free trade area + all member countries adopt a common set of trade restrictions with non-members

Question 5

common market

Answer 5

customs union + all barriers to movement of labor and capital goods among member countries are removed

Question 6

economic union

Answer 6

common market + member countries establish common institutions and economic policy

Question 7

monetary union

Answer 7

economic union + member countries adopt a single currency

Question 8

exports - imports =

Answer 8

private savings + government savings - domestic investment

Question 9

real exchange rate =

Answer 9

nominal exchange rate * foreign CPI / domestic CPI

Question 10

change of an exchange rate is calculated

Answer 10

as the percentage appreciation or depreciation of the base currency

Question 11

percentage change of spot currency rate =

Answer 11

forward / spot - 1

Question 12

forward exchange rate =

Answer 12

spot * (1 + int price currency) / (1 + int base currency)

Question 13

J-curve effect

Answer 13

depreciation of the domestic currency may increase a trade deficit in the short run because of existing foreign currency priced export contracts even though it will eventually reduce the trade deficit