QUESTION 22

Let e = $/pound. The Hotel Russell is in London and the Hotel Pierre is in New York. Suppose that e is initially equal to

4 and then it falls to 2. It follows that:

a.

the dollar price of a night at the Russell will rise and the pound price of a night at the Pierre will fall

b.

the dollar price of a night at the Russell will fall and the pound price of a night at the Pierre will

also fall

c.

the dollar price of a night at the Russell will fall and the pound price of a night at the Pierre will

rise

d.

the dollar price of a night at the Russell will rise and the pound price of a night at the Pierre will

also rise

3 points

QUESTION 23

Suppose that a French winery sells a case of Bordeaux (a type of French wine) to a customer in the U.S. This transaction:

a.

will be recorded as a debit on the U.S. current account

b.

will be recorded as a credit on the U.S. capital account

c.

will be recorded as a debit on the U.S. capital account

d.

will be recorded as a credit on the U.S. current account