A country running a large current account deficit tends to have Question 18 options: a booming export oriented economy an excessively strong currency a large surplus in its financial account a large budget surplus

A country running a large current account deficit tends to have Question 18 options: a booming export oriented economy an excessively strong currency a large surplus in its financial account a large budget surplus

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 12QA

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1. In order to reduce its current-account deficit, the United States would NOT do which of the following? a . raise national product relative to national spending b. decrease savings relative to domestic investment c . increase savings relative to domestic investment d . reduce the federal budget deficit
Those who say the growing current account deficit in the United States is not a significant problem make the argument that: 1.the current account deficit may hurt exporters, but American consumers gain as a result of lower relative prices. 2.the current account deficit is offset by an equally large capital account deficit, which ultimately leads to appreciation of the U.S. dollar. 3.the large current account deficit will ultimately lead to a current account surplus. 4.the increased investment in the United States as a result of the current account deficit will ultimately lead to increases in wealth and economic growth in the United States.
A current account deficit implies that* more goods and services are exported than are imported. the country borrowed from abroad more than it loaned and/or sold off some of its assets. the country is going bankrupt. the value of the dollar will rise. there is excessive consumption of foreign financial assets.
Twin deficits key concern for next PH presidentThe next CEO of the Philippines will have to grapple with “twin deficits” that may return this year, as thegovernment spends more to rebuild the economy and the demand for foreign exchange expands with theresumption of investment spending coming out of a prolonged pandemic.This is according to JP Morgan economist Nur Raisah Rasid, who sees a return to twin deficits—referring to asimultaneous deterioration in the government’s budget position and widening of the country’s current accountdeficit as foreign exchange transactions with the rest of the world increase Which of the following macroeconomic objective is measured by the variable(s) discussed in the above extract?a) Price stabilityb) Redistribution of incomec) Full employmentd) Balance of payments stability
Question One Zambia like many countries in the sub-Saharan region have run substantial fiscal deficits over the last decade while at the same time their monetary authorities have allowed money supply to grow excessively thereby fueling inflationary pressure (Zambia’s inflation reached 22.5% in mid-2021 and has remained above the 6-8% target). Zambia like most nations on the continent have turned to the IMF seeking bailout packages to avoid economic collapse. As part of the IMF bailout packages, the Zambian ministry of Finance is required to narrow the fiscal deficit while the central bank is required to implement measures to bring inflation back into the target band of 6-8%. As an economist hired by his Excellence president Hakainde Hichilema, using appropriate macroeconomic models explain the short run impact of the IMF prescription on economic activity, price level, interest rates, exchange, net exports.
If a country is having its currency pegged to the U.S. dollar (hard peg), and the confidence in the domestic currency falls, sparking a capital outflow. What action would its central bank take to defend its fixed rate against the dollar? Question 23 options: It would build up its international reserve (selling the domestic currency) It would dip into its international reserve (buying the domestic currency) It would raise domestic interest rates It would lower domestic interest rates
Which of the following best describes the situation when the value of a country’s exports is more than that of its imports? a. The country is experiencing a financial account surplus. b. The country is experiencing a current account surplus. c. The country is experiencing a financial account deficit. d. The country is experiencing a current account deficit.
The size of a country’s national debt should not be of much economic concern as long as:a. the debt does not lead to rising inflation.b. the debt is funded from international sourcesc. the general population hoards treasury billsd. it increases at a slower rate than GDP does
If a central bank decreases interest rates, then gradually: a. the country's gross domestic product is likely to decrease. b. foreign exchange rate is likely to appreciate. c. demand for exported goods and services is likely to increase. d. flows of investment funds into the country are likely to decrease.
Apart from risk components, several macroeconomic factors—such as Federal Reserve (the Fed) policy, federal budget deficit or surplus, international factors, and levels of business activity—influence interest rates. Based on your understanding of the impact of macroeconomic factors, identify which of the following statements are true or false: Statements True False Countries with strong balance sheets and declining budget deficits tend to have lower interest rates. When the economy is weakening, the Fed is likely to increase short-term interest rates. Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates. The Federal Reserve Board has a significant influence over the level of economic activity, inflation, interest rates in the United States.
Suppose the economy is in a recession and the government is running a budget surplus. This implies the government is running a __________ and decreasing its __________. structural surplus; net debt structural deficit; net debt structural deficit; net asset structural surplus; net asset balanced budget; net asset
(a) Suppose that the economy of Microland is expanding rabidly. Due to this rapid expansion, the Federal Reserve Bank is pursuing a contractionary monetary policy. Draw clearly labeled graphs for each market (Money market, Goods Market and Investment) to show the effects of this policy on the equilibrium interest rate, investment and output. (b) Suppose that the economy of Macroland is expanding rabidly. Due to this rapid expansion, the Federal Government is pursuing a contractionary fiscal policy. Draw clearly labeled graphs for each market (Money market, Goods Market and Investment) to show the effects of this policy on the equilibrium interest rate, investment and output. Is there any crowding-out due to the contractionary fiscal policy?