PART I: TRUE/FALSE/UNCERTAIN QUESTIONS: TOTAL Indicate whether the following statement is true, false or uncertain. You do not have to justify your answer. 1-One reasoning that explains the U.S. current account deficits is that the high savings of the 'savings glut' countries, which include China, led to a fall in the world real interest rate that created (financed) the current account deficits (of the U.S. and other countries) to match the surpluses of the 'savings glut' countries. 2- A strong dollar can ensure a surplus capital account, which in turn can finance the U.S. current account deficits. 3- An anticipated increase in the real exchange rate is associated with an increase in the domestic real interest rate relative to the foreign real interest rate. 4- The divergence of the domestic rate of time preference and the world real rate of interest for a small open economy is an issue primarily be- cause of its implications for external imbalances in the long run. If the domestic rate of time preference is smaller that the world real rate of interest, in the long run, the domestic country's assets and con- sumption will grow faster than the world's, and the country will always be a net lender (eventually it will end up owning all of the world's wealth. 5- A currency could be overvalued if consumer prices are generally higher at home than abroad when compared in a common currency, or under- valued if these prices are lower at home. 6- Before the introduction of the euro in 1999, seiniorage (inflation tax) was more important source of revenue for Southern European countries