Q: People sometimes worry that American trade with other countries will lead to large U.S. trade…
A: The answer is - a) have both current account and financial account deficits at the same time.
Q: What are the causes of current account deficit, and how CAD is affecting the economy of Pakistan?
A: Enormous and determined exchange and current account deficit are the absolute most consuming points…
Q: QUESTION 4 With the help of diagram, explain if the appropriate macroeconomic policies to defend…
A:
Q: What kind of monetary policy can central banks carry out in the case of surplus in capital account…
A: Introduction Monetary policy will consist of the decision of the government and the central bank…
Q: Are current account deficits necessarily undesirable? Provide a brief justification.
A: What Is a Current Account Deficit and How Does It Affect You? The current account deficit is a…
Q: Suppose that a nation has a current account deficit of 80 million dollars and a financial account…
A: PART 1 The balance of payments is a statement that looks at all transactions in the economy as well…
Q: In 2018, Germany had the world’s largest current account surplus of US$291 billion. Using this one…
A: Since you have posted a question with multiple sub-parts, we will solve first three sub parts for…
Q: Why would a market "expectation" of a national rise in the minimum wage in the open macro-economy…
A: The outlook for an economy and the performance of its variables possessed by consumers refer to…
Q: Indicate whether the following statements are true, false, or uncertain and explain why. 1. A…
A: Let's have a look on the statements below:
Q: “There has been a turnaround from the sizeable net outflows over the past two years when South…
A: Strategic features of the turnaround strategy for the year Included: • Worked to improve the…
Q: "Attractive interest rate" is one of the important monetary policy tools for a country that has a…
A: As demand for the currency grows, an increase in interest rates might cause the currency to…
Q: Why could a current account deficit stimulate an economy? List at least two reasons and explain with…
A: Current account deficit The current account deficit is a situation in the economy of a country…
Q: Suppose a country was facing the problem of budget deficit and by reducing government expenditures…
A: We can understand this particular situation through the IS-LM model and the foreign exchange market…
Q: In a flexible exchange rate system with perfect capital mobility, expansionary fiscal policy will…
A: A flexible exchange rate(FER) system defines as the rate of exchange between two counties which is…
Q: Explain the causes of current account deficit, and how CAD is affecting the economy of Pakistan?
A: A deficit of CA {current account} is described as a measurement of trade that states that a nation…
Q: If Canada borrows more from the foreign countries than it lends to the foreign countries, then…
A: here we find the correct answer as follow;
Q: Discus strategies for improving current accounts position
A: Answer: Introduction: The current account on the balance of payment account records all the…
Q: Given that a country has a large and possibly unsustainable current account deficit, explain how you…
A: We'll answer the first 3 sub parts as no particular sub part has been mentioned. Current account…
Q: In explicit detail, describe the ‘twin deficit problem’, and discuss whether expansionary fiscal or…
A: (Q) In explicit detail, describe the ‘twin deficit problem’, and discuss whether expansionary fiscal…
Q: If the U.S. has no access to international savings, through what mechanism will crowding out of…
A: The international savings would result in the foreign investment which includes the foreign direct…
Q: Select all of the following statements which can be said of a country with a current account deficit…
A: The current account deficit is a measurement of a country’s trade where the value of the goods and…
Q: The elasticities approach and the absorption approach are theories of the balance of trade that…
A: The elasticity approach and the absorption approach are the two important models which were designed…
Q: 1) Large current account deficits imply large financial account surpluses. True Or False?Explain. ww
A: Hi! Thank you for the question but we can only answer one question at a time or up to three parts of…
Q: 3. In a system of fairly high (but imperfect) capital mobility and a fixed exchange rate within the…
A: Fiscal policy:- The use of government spending and tax laws to impact economic conditions,…
Q: A large country imposes capital controls that prohibit foreign borrowing and lending by domestic…
A: In the international market, a capita control will lead to slow down in the global market due to…
Q: China had a $372 billion overall current account surplus in 2007. Assuming that China’s net debt…
A: The current account computes the import and export of services and commodities of a country over the…
Q: QUESTION 4 a) Given that a country has a large and possibly unsustainable current account deficit,…
A: We'll answer the first question as second part is opinion based. Current account deficit occurs when…
Q: You have the following annual figures for the New Zealand economy. Investment…
A: The Saving = Private Saving +Public Saving. The current accounts of BOP includes the net export,…
Q: A higher level of GDI relative to the country's absorption level contributes to a higher current…
A: In economics, GDI stands for Gender Development Index, which explains the expansion of ability of…
Q: Based on the table below, which of the following is likely to be true? a. From the first period to…
A: I the mentioned question, we have to answer as per the data present in the table. Lets discuss one…
Q: The elasticities approach and the absorption approach are theories of the balance of trade that…
A: Balance of trade (BOT) is the difference between the value of the country's total imports and…
Q: Why is a current account surplus equivalent to foreign investment ?
A: The countries worldwide gets involved in the sale and purchase of the goods, services, inputs of…
Q: A country finds itself in the following situation: a government budget deficit of $700; total…
A: ANSWERThere are two main sources for the supply of financial capital in the U.S. economy: saving by…
Q: Comment on the folllowing statement "Since the United States imports more than it exports it is…
A: Capital account and Current account Answer: Capital account and current account are the important…
Q: shows the expected effect on the value of the USD/EUR exchange rate under such monetary stimulus
A: Monetary Stimulus A monetary stimulus is a strategy used by central banks to control the nation's…
Q: Exercise 2.2 Consider a two-period economy that has at the beginning of period 1 a net foreign asset…
A: Given Information: The new foreign asset position (in period 1) = -100 Current account deficit (in…
Please provide detailed explanation for each of the problems.
Step by step
Solved in 3 steps
- 1) Large current account deficits imply large financial account surpluses. True Or False?Explain. 2) The longer the "pass-through" period following a devaluation, the faster the desirable balance of trade effects of a devaluation will appear on quantities traded. True or False? Explain. 3) Suppose we observe the following 1-year interest rates: į Turkey = 10% į USA = 2% The exchange rate is quoted as the TL price of dollars and is currently E = 6.0 TL Given the information above, what is the 12-month forward rate? 4) How is the balance of payments linked to national saving and investment? Explain.1) Large current account deficits imply large financial account surpluses. True Or False?Explain. 2) The longer the "pass-through" period following a devaluation, the faster the desirable balance of trade effects of a devaluation will appear on quantities traded. True or False? Explain. 3) Suppose we observe the following 1-year interest rates: į Turkey = 10% į USA = 2% The exchange rate is quoted as theTL price of dollars and is currently E = 6.0 TL Given the information above, what is the 12-month forward rate? 4) How is the balance of payments linked to national saving and investment? Explain.Suppose that Americans decide to increase theirsaving.a. If the elasticity of U.S. net capital outflow withrespect to the real interest rate is very high, willthis increase in private saving have a large orsmall effect on U.S. domestic investment?b. If the elasticity of U.S. exports with respect to thereal exchange rate is very low, will this increase inprivate saving have a large or small effect on theU.S. real exchange rate?
- A case study in the chapter analyzed purchasingpower parity for several countries using the pricc ofBig Macs. Here arc data for a few more countries: a. For each country, compute the predicted exchangerate of the local currency per U.S. dollar. (Recallthat the U.S. price o( a Big Mac was $4.93.)b. According to purchasing-power parity, what is thepredicted exchange rate between the Hungarianforint and the Canadian dollar? What is the actualexchange rate?c. How well docs the theory of purchasing-powerparity explain exchange rates?A big Mac costs $3.35 in the U.S. and 31 Pesos in Mexico. The current exchange rate is $1 buys 11 Pesos. Then according to purchasing power parity, we can predict that the U.S. dollar should over time, and in order for ppp to hold we need Et = %3D O appreciate; 10.11 O appreciate; 9.25 O depreciate; 10.11 O depreciate; 9.25The benefits of adopting a flexible exchange rate is that, a.in response to shocks to the demand for Australian exports, the value of the currency would adjust to moderate these effectsb. changes in the interest rate will have no effect on the exchange rate that is determined in the foreign exchange market c.the exchange rate can be more volatile d. an economy will be able to well predict the prices of exports and imports Why A is the correct answer? What is meant by a flexible exchange rate?
- Q.1.10 Which of the following statements is correct? (2)(1) When a British firm invests in a bicycle manufacturing facility in South Africa,the amount concerned is entered as an inflow on the current account of theSouth African balance of payments.(2) When someone purchases a second‐hand car, the transaction is included inthe calculation of GDP in the year the sale took place.(3) A deficit on the current account of the balance of payments indicates thatthe country exported more than it imported during the period in question.(4) In the base year, the value of nominal GDP is equal to the value of real GDP.E1 The higher the value of e, the ______________(More or less) units of foreign currency a dollar buys. When a nominal exchange rate goes up, we say the domestic currency is _________(appreciating or depreciating) against the foreign currency. When a nominal exchange rate goes down, we say that the domestic currency is _________(depreciating or appreciating) against the foreign currency.The current exchange rate is $1.19 / Euro. The expected inflation rate for the next year in the U.S. is 0.62% while it is 0.79% in the EU. What would be the expected exchange rate in one year’s time if Purchasing Power Parity holds? Provide your answer till 4 digits after the decimal point. Based on yourresult, is the Euro expected to appreciate or depreciate?
- Assume Switzerland has a one-year interest rate of 3% and that of Ghana is 16%. If the International Fisher Effect (IFE)holds, what would you forecast for the Swiss franc exchange rate with respect with the cedi be for a one-year period? Assume that the initial exchange rate is 5000cedis to a Swiss franc.Relative purchasing power parity Multiple Choice explains exchange rates as being part of the equilibrium for the markets for financial assets denominated in different currencies says that a single currency will have the same price everywhere, once the prices at difference places are expressed in that currency. theorizes that the difference between changes over time in product-price levels in two countries will be offset by the change in their exchange rate over this time. suggests that the exchange rate should be equal to the ratio of the domestic price level to the foreign price level.Draw and carefully label the Euro-U.S. dollar foreign exchange graph as discussed in the textbook.You must use the Euro/US $ exchange rate as your price variable. Assume we are currently in marketequilibrium. Illustrate using the graph how the equilibrium euro/dollar foreign exchange rate wouldbe affected by the following events, holding all else constant. Use a different graph for each part.Explain in words why the equilibrium exchange rate changed. Show an increase in US productivity relative to the Euro Area