EBK ECONOMICS TODAY
EBK ECONOMICS TODAY
18th Edition
ISBN: 9780133920116
Author: Miller
Publisher: YUZU
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Chapter 33, Problem 2P
To determine

(a)

Balance on the capital account.

To determine

(b)

Change in official reserves.

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Write 300 words for each question. 1) If a country is a big exporter, is it more exposed to global financial crises? 2) A British pound cost $2.00 in U.S. dollars in 2008, but $1.27 in U.S. dollars in 2017. Was the pound weaker or stronger against the dollar? Did the dollar appreciate or depreciate versus the pound? 3) Why does the United States not have an absolute advantage in coffee?
Alpha’s balance-of-payments data for 2008 are shown below. All figures are in billions of dollars. What are the (a ) balance on goods, (b ) balance on goods and services, (c ) balance on current account, and (d ) balance on capital and financial account? Suppose Alpha needed to deposit $10 billion of official reserves into the capital and financial account to balance it against the current account. Does Alpha have a balance-of-payments deficit or surplus? Explain.
Suppose that a country follows a managed float policy but that its exchange rate is currently floating freely. In addition, suppose that it currently has a massive current account deficit. Does it also have a balance of payments deficit? If it decides to engage in a currency manipulation in order to reduce the size of its current account deficit, will it buy or sell its own currency? As it does so, what will happen to its official reserves of foreign currencies? Will they get larger or smaller? And, finally, will the country have a balance of payments deficit while it is manipulating the exchange rate?
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