A surplus on the current account of the balance of payments indicates that: (1) Financial inflows are less than financial outflows; (2) Imports are greater than exports; (3) Financial inflows are greater than financial outflows; (4) Exports are greater than imports.
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Multiple choice
A surplus on the current account of the balance of payments indicates that:
(1) Financial inflows are less than financial outflows;
(2) Imports are greater than exports;
(3) Financial inflows are greater than financial outflows;
(4) Exports are greater than imports.
Step by step
Solved in 2 steps
- Reducing Economic Exposure Colorado, Inc., is a U.S.-based MNC that obtains 10 percent of its supplies from European manufacturers. Sixty percent of its revenues are due to exports to Europe, where its product is invoiced in euros. Explain how Colorado can attempt to reduce its economic exposure to exchange rate fluctuations in the euro.Q3-18 A situation where a country announces a parity value for its currency and permits small variations around that value, but also adjusts the parity regularly by small amounts according to various indicators, is known as Select one: a. a dirty float. b. a crawling peg. c. a managed float strategy of "leaning against the wind." d. a "wider band."If investors believe that the country's exchange rate peg is not credible, the risk premium on that country's local currency denominated assets will probably a) increase b) decrease c) stay the same d) we do not have enough information
- Based on the table, which of these currency devaluations would result in the largest proportional impact on purchasing power? A Brazilian currency drop of 0.1% in value against American currency for Brazilian consumers. An American currency drop of 0.1% in value against Japanese currency for American consumers. A Thai currency drop of 0.1% in value against Brazilian currency for Thai consumers. A Mexican currency drop of 0.1% in value against Thai currency for Mexican consumers.“There has been a turnaround from the sizeable net outflows over the past two years when South African companies stepped up their efforts to internationalise their businesses. The shift in direct investment trends made a small contribution to improving the financial account of South Africa’s balance of payments, which showed a surplus of 3.5% for the third quarter, up from 1.3% the previous quarter. The Reserve Bank’s quarterly bulletin shows that capital inflows were more than adequate to finance the deficit on the current account deficit of the balance of payments, which widened to 4.1% from a revised 2.9% in the third quarter. Economists expect that the current account deficit, which tends to be a driver of the rand exchange rate, will narrow again in the fourth quarter as exports pick up again” (Joffe, 2016). In your opinion, can the government keep export demand stimulated such that the balance of payments remains dazzlingSince 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, currencies that are predominantly market-driven are considered to be what type of regime?
- For the above condition to hold, perfe mobility must be assumed and the domestic interest rate must be the foreign interest rate. equal to higher than lower than 2. When a country pegs its exchange rate, an increase in government spending A. the foreign rate. B. the interest rate. C. output. D. all of the above (G) increases: all of the above 3. In an economy with fixed exchange rates that is performing near full output, ______could become an issue that monetary policy would otherwise be able to address in an economy with flexible exchange rates by _____The elasticities approach and the absorption approach are theories of the balance of trade that emphasize trade in real goods and have little to say about the capital account. True or False ? ExplainIn the Mundell-Fleming model of the open-economy, what is: A. The condition for equilibrium in the product market? B. The condition for equilibrium in the money market? C. The condition for equilibrium in the foreign exchange market?
- Which of the following statements is(are) not correct? A) Foreign exchange speculators earn a profit by a bid-ask spread on currencies they purchase and sell. B) Foreign exchange arbitragers seek to profit from simultaneous exchange rate differences in different marketsc C)A forward contract to deliver British pounds for U.s. dollars could bedescribed either as selling pounds forward or buying dollars forward. D) None of them E)All of themContrast floating exchange rates, a soft peg, hard peg, and merged currency as options that a country’s economy has in terms of managing its exchange rate relative to the rest of the world. For each, give a benefit as well as a drawback.A carry trade is a trading strategy that involves borrowing low-interest currencies and buying high-interest currencies, with results that can be profitable. During much of the 2000s, Japanese yen interest rates were close to zero while Australia’s interest rates were positive. Investors pursued a carry trade strategy, investing billions in Australian dollars and driving that currency’s value up against the yen. According to the interest parity condition, such a strategy should not be systematically profitable: On average, shouldn’t the interest advantage of Australian dollars be wiped out by relative appreciation of the yen? Is the prevalence of the carry trade evidence that interest parity is wrong? What is the risk of investing in such a strategy? Incorporate the Japanese Yen/Australian Dollar exchange rate history in your discussion.
