IB Econ 4.6 Balance of Payments (HL) | Baamboozle - Baamboozle

Economic growth is caused by a persistent current account...

Surplus

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What is the value of the current account?

-$130 billion

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How could a country adopting a fixed exchange rate system correct a persistent current account deficit if its long-term PEDx = 0.5 and the PEDm = 0.6

Marshall-Lerner condition is reached, so it can devalue its currency.

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Graph out how a current account deficit can be represented using a diagram.

Demand (credits) is lower than supply (debits)

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The PED of exports and imports are both elastic. Based on this info, can we determine whether the MLC is fulfilled? Why or why not?

We cannot, as we don't know the extent to which it is inelastic.

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Which account is remittances under?

Current account

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lifesaver

Give 15 points!

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gold

Win 50 points!

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shark

Other team loses 25 points!

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baam

Lose 25 points!

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Which account is portfolio investment under?

Financial account

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What is the value of the trade balance?

-$120 billion

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Outline TWO reasons why a depreciation of the currency might not immediately correct a current account deficit.

Ongoing contracts, existing habits and tastes, limited access to info

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Explain how exporters are affected by when a persistent current account surplus gets corrected

Lose competitiveness - previously low exchange rate appreciates in value

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thief

Give points!

rocket

Go to first place!

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fairy

Take points!

baam

Lose 15 points!

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What is the formula of the balance of payments?

Current account + financial account + capital account + errors & omissions = 0

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Identify the impact that a persistent current account deficit would have on exchange rates

Downward pressure on exchange rates.

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Which account is debt forgiveness under?

Capital account

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boom

Lose 50 points!

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magnet

Take 5 points!

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shark

Other team loses 15 points!

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lifesaver

Give 20 points!

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