In 2006, the United States had A) a surplus in the current ...

[bobbie]

In 2006, the United States had
 
  A) a surplus in the current account.
  B) a balance in the current account.
  C) a deficit in the current account.
  D) From 2006 data, it is too difficult to determine whether a surplus or a deficit existed in the current account.
  E) a positive balance of net financial flows.

Question 2

What is the interest parity condition?
 
  What will be an ideal response?

[mohan]

Answer to Question 1

C

Answer to Question 2

The condition that the expected returns on deposits of any two currencies are equal when measured in the same currency is called the interest parity condition. It implies that potential holders of foreign currency deposits view them as equally desirable assets, i.e. risk is assumed away.
In notational forms:
R = RE + ( - E/E)/E/E