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20
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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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15
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Which account is remittances under?
Current account
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trap
No points!
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seesaw
Swap points!
Okay!
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rocket
Go to first place!
Okay!
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lifesaver
Give 25 points!
Oops!
25
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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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20
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What is the value of the current account?
-$130 billion
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monster
Reset all scores!
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magnet
Take 25 points!
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rocket
Go to first place!
Okay!
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banana
Go to last place!
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thief
Give points!
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25
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shark
Other team loses 25 points!
Okay!
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fairy
Take points!
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25
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thief
Give points!
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25
10
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A persistent current account surplus causes what type of inflation?
Demand-pull inflation.
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15
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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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10
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Economic growth is caused by a persistent current account...
Surplus
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20
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Which account is portfolio investment under?
Financial account
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25
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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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15
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The upside down J curve occurs following a/an...
appreciation of the nation's currency
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20
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The Marshall-Lerner Condition occurs when...
PEDX + PEDM > 1
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15
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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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15
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Which account is debt forgiveness under?
Capital account
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