If a country runs a surplus in financial account, its current account has a deficit. True, false, or uncertain? Explain.
The statement "if a country runs a surplus in financial account, its current account has a deficit" is cent percent true. This can be explained as follows:-
A surplus on the financial account means that there are more investment funds flowing into the country than flowing out. Inward investment may help create jobs and boost growth of an economy, but an investor investing in an economy expects a return. Therefore, a surplus on the financial account will lead to outflows of interest and dividends in the future, thus affecting/causing deficit in the current account. Further any inflow of funds may exert upward pressure on the exchange rates, as the demand for the domestic currency will increase. This will adversely affect the current account if the increase in export prices makes exports less attractive. So it can be concluded that surplus in financial account will cause a deficit in current account.
If a country runs a surplus in financial account, its current account has a deficit. True,...
True, False or Uncertain: If a country is running a current account deficit, then it is investing more than it saves. Briefly explain your answer.
Suppose that a certain country has a current account surplus in its balance of payments. Does this mean that the country will necessarily have a financial account deficit? Explain why or why not.
Suppose a country has a current account surplus of $8 billion, but a financial account deficit of $5 billion. a) Is its balance of payments a deficit, surplus or neither? The balance of payments is (select one). b) What change in official exchange reserves would you see? Note: Keep $0 for the second part if you think there is no change. The official exchange reserves would (select one) by $0 billion. c) Is the central bank buying or selling foreign...
A country experiencing a current account surplus will see its currency ____, while a country experiencing a current account deficit will see its currency ____. Appreciate, appreciate Appreciate, depreciate Depreciate, appreciate Depreciate, depreciate
If a country has a fixed exchange rate then the: Multiple Choice capital account surplus or deficit must be matched by a deficit or surplus in the official reserve account. current account surplus or deficit must be matched by a deficit or surplus in the official reserves account. official settlements balance will be equal in size, but opposite in sign, to the change in the official reserves. current and capital account balances will be equal in size, but opposite in...
If a country has a current account surplus and a net capital inflow in the private financial account, the country’s international reserves are mostly like to a. Increase. b. Decrease. c. Remain unchanged
When a country has a current account surplus then it is: Multiple Choice lending to foreigners and increasing its net foreign wealth. borrowing from foreigners and/or reducing its holdings of foreign denominated financial assets. reducing its net foreign wealth. borrowing from foreigners, reducing is holdings of foreign denominated financial assets, and reducing its net foreign wealth. None of the options.
True or false: A larger current account deficit cannot occur unless the government budget deficit increases or households save less. Briefly explain your answer. Explain the results of a contractionary fiscal policy implemented in a fixed exchange rate regime economy
In 2019 Country A had a current account deficit of $1.2 billion. CountryA’s capital account was in a $100 million surplus. In addition, CountryA’s factors of production located in foreign countries earned $600 million.Country A had a trade deficit of $800 million. Assume Country A neithergave nor received unilateral transfers. Country A’s GDP was $9 billion.Answer the following questions about Country A in 2019. and show your work. (a) What happened to Country A’s net foreign assets during that year?Did...
Explain the term Financial Account deficit, and give two reasons why a country may have such a deficit.