urkish economy has struggled with current account deficits since the 2000s. However, an adjustment in current account balance was observed in years a) 2001, b) 2009 and c) 2018 and 2019. Discuss what type of automatic mechanisms and adjustment policies might have contributed to this adjustment. Explain clearly by being specific about the type of the mechanism and policy for each year.

urkish economy has struggled with current account deficits since the 2000s. However, an adjustment in current account balance was observed in years a) 2001, b) 2009 and c) 2018 and 2019. Discuss what type of automatic mechanisms and adjustment policies might have contributed to this adjustment. Explain clearly by being specific about the type of the mechanism and policy for each year.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: International Finance

Section: Chapter Questions

Problem 11QP

See similar textbooks

Similar questions

Indicate whether the following statements are true, false, or uncertain and explain why. 1. A two-period economy runs trade surpluses in both periods. It follows that the current account in period 1 can have either sign (depending on the magnitude of T B1), but the current account in period 2 must be positive. 2. A country starts 2017 as a net creditor. The interest rate on its net asset position is 10 percent. That year, it runs a current account deficit. It follows that the trade balance in 2017 was also negative. 3. The fact that over the past quarter century the United States has run larger and larger current account deficits is proof that American household savings have been shrinking
What is the meaning of a surplus (deficit) on the current account balance? What economic transactions give rise to the receipt of dollars from foreigners? What transactions give rise to payments to foreigners?
Explain the impact of the changes in the following variables on Current Account balance a) Higher domestic Inflation b) Higher domestic growth c) Higher Productivity Increase d) An increase in savings e) An increase in government tax revenues f) A decline in government expenditures
According to David Hume’s theory of automatic price adjustment, countries experiencing current account deficits see price levels decrease, making them more competitive and increasing exports. That makes the current account deficit disappear.’. Critically explore this statement and provide examples to confirm or disprove it
‘According to David Hume’s theory of automatic price adjustment, countries experiencing current account deficit see price levels decrease, making them more competitive and increasing exports. That makes the current account deficit disappear.’. Critically explore this statement and provide examples to confirm or disprove it
Will exchange rates correct a balance-of-trade deficit? Consider the case of a balance-of-trade deficit in the United States, along with a floating exchange rate. During a balance-of-trade deficit, net financial_______(Inflows/outflows) may be enough to offset net international trade flows, preventing the US dollar from________(Strengthening/weakening) and preventing exchange rate changes from_________(correcting/exaggerating) the problem.
For Turkiye 2019-2023: Identify which component accounts for the largest proportion in the total current account balance, whether such component balance is typically positive/negative during the period and interpret the implication of this negative/positive sign. Relate this to the specific context of the country
Japan has run large current account surpluses for much of the past two decades, yet no one ever asks if these surpluses are sustainable. Why are surpluses treated differently than deficits?
Suppose that a nation has a current account deficit of 80 million dollars and a financial account surplus of 20 million dollars. How would the central banks’ foreign reserves change ?( Answer the question based on the assumption that there is no change in financial account). Now suppose that foreigners purchased 80 million worth of domestic assets. How would this affect the balance of payments accounts and central banks’ reserves?Please explain.
A small, open economy with a fixed exchange rate system faces a balance of payments deficit due to a combination of high import levels and capital outflows. The central bank is using its foreign exchange reserves to support the fixed exchange rate, but these reserves are rapidly depleting. The government is considering policy options such as moving to a flexible exchange rate system, implementing capital controls, or seeking external financial assistance. In this case, the policy choices are primarily aimed at: A) Maintaining the fixed exchange rate at all costs B) Addressing the balance of payments deficit and stabilizing the exchange rate C) Completely closing off the economy from international trade D) Ignoring the balance of payments deficit
Explain, with the aid of a graph, the effect on the rand/dollar exchange rate and the equilibrium quantity of dollars if there is a decrease in imports from the USA to South Africa. Comment on the effect of this on the current account balance as well as on domestic prices.
China had a $372 billion overall current account surplus in 2007. Assuming that China’s net debt forgiveness was zero in 2007 (its capital account balance was zero), what can you specifically conclude about the relationship of Chinese purchases of financial and real assets abroad versus foreign purchases of Chinese financial and real assets? Explain.