9:23Vo) 4G ll 65%IRead Only - You can't save changes to this file.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 fasterthe desirable balance of trade effects of a devaluation will appear onquantities traded. True or False? Explain.3) Suppose we observe the following 1-year interest rates:į Turkey = 10%į USAThe exchange rate is quoted as theTL price of dollars and iscurrently E = 6.0 TL= 2%Given the information above, what is the 12-month forwardrate?4) How is the balance of payments linked to national saving andinvestment? Explain.ort case scenario and then answer the questions. Fatma has always loved to cook and is interested in startilure rate of new businesses, she is considering buying an existing catering business, Tasty Caterers that is ue business is highly profitable, but Fatma has her doubts She wonders why the owners of Tasty Caterers woit is such a money-maker. Furthermore, the price that they are asking seems high to Fatma Without any forks a friend, Rawan, for advice la) What suggestion do you think Rawan would have given Fatma, so that sheI standing of the company Tasty Caterers? (5 Marks) 1b) 2) Explain in detail how the suggestion would haveMarks) If Fatma decides to purchase Tasty Caterers, what plans do you think she must have in place? Give spnning with regard to Fatma's business (10 Marks)

Since you have asked multiple questions, we will solve the first question for you. If you want any…

Answered: 1) Large current account deficits imply…

Business

Economics

1) Large current account deficits imply large financial account surpluses. True Or False?Explain.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 44P: Imagine that the U.S. economy finds itself in the following situation: a government budget deficit...

See similar textbooks

Similar questions

Explain the relationship between a current account deficit or surplus and the flow of funds.
Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1 of Germanys GDP; private savings is 20 of GDP; and physical investment is 18 of GDP. Based on the national saving and investment identity, what is the current account balance? If the government budget surplus falls to zero, how will this affect the current account balance?
Why does the trade balance and the current account balance track so closely together over time?
Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of 100 billion, total domestic savings of 1,500 billion, and total domestic physical capital investment of 1,600 billion. According to the national saving and Investment Identity, what will be the current account balance? What will be the current account balance if Investment rises by 50 billion, while the budget deficit and national savings remain the same?
No gpt oir Al response please Question 8:Consider that you are a forex trader looking to profit from the carry trade strategy. You notice that the interest rate in Country A is 1% and in Country B it is 5%. You decide to borrow in the currency of Country A and invest in the currency of Country B.1) What is your expected profit from the interest rate differential alone, assuming no change in the exchange rate?2) Now, suppose that over the course of your investment, the currency of Country A appreciates against the currency of Country B by 2%. How does this affect your carry trade strategy and what would be your overall profit or loss?
The Table above (in Q.1) shows data forTerrania and its three trading partners A,B, C. Assume that the real effectiveexchange rate index in year 1 equals 100,defining the index so that a highernumber means a stronger exchange ratethe value of the index in year 2 isNote: express your answer to 2 decimalplaces
Answer the following questions 1.a. Today many Central Banks around the World are thinking of increasing interestrates. Why? What could be the dangers of increasing those interest rates toomuch?1.b.What will happen to the trade balance and the real exchange rate of a smallopen economy when govemment purchases increase, such as during a war?Does your answer depend on whether this is a local war or a global war? Onthose grounds, In the current situation of the Russian invasion, what shouldhappen between the dollar and the Euro?
4) Suppose that the long term interest rate is decreasing since there is anexpectation that the economy is delving into the recession. How that changemight affect the foreign exchange rate in the country? Discuss? (Use graphs)
Question 10 a b and c Assume that there is a free-floating exchange rate. Will the following cause sterling toappreciate or depreciate relative to other currencies? In each case, you should considerwhether there is a shift in the demand or supply curves of sterling (or both) and whichway the curve(s) shift(s). You may assume that the impacts are ceteris paribus, that is,everything else remains the same. Illustrate your answers and give a short explanation interms of currency supply and demand. (a) UK imports increase. (b) UK interest rates rise relative to those abroad.(c) The UK experiences lower inflation than other countries, but with no change in interestrates.
2.2) Explain with an example why the current account and financial account balances must exactly offset each other. Provide example with illustration.
Give typing answer with explanation and conclusion Suppose that the current exchange rate is 1.48 euro = 1 pound, but it is expected to be 1.35 euro =1 pound in one year. If the current interest rate on a one-year government bond in the United Kingdom is 9 %, what does the interest-rate parity condition indicate the interest rate will be on a one-year government bond in Germany? Assume that there are no differences in risk, liquidity, taxation, or information costs between the bonds. The German interest rate will be ________ %. (Round your response to two decimal places.)
The nation of Pecunia had a current account deficit of $1 billion and a nonreserve financial account surplus of $500 million in 2021. a) What was the balance of payments of Pecunia in that year? What happened to the country’s net foreign assets? b) Assume that foreign central banks neither buy nor sell Pecunian assets. How did the Pecunian central bank’s foreign reserves change in 2021? How would this official intervention show up in the balance of payments accounts of Pecunia? c) How would your answer to (b) change if you learned that foreign central banks had purchased $600 million of Pecunian assets in 2021? How would these official purchases enter foreign balance of payments accounts? d) Draw up the Pecunian balance of payments accounts for 2021 under the assumption that the event described in (c) occurred in that year.