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Discuss TWO (2) main policy measures that can be used to correct the Balance of Payments (BOP) disequilibrium
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- The following figure shows the Current Account Balance (similar to the Trade Balance) of Japan (black line) and China (red line). During their growth periods (1980s for Japan and 2000s for China), were these countries net savers or borrowers? What are some ways that the governments intervened in the foreign exchange market to keep their BOP from adjusting towards 0? 12.5 10.0 7.5 5.0 2.5 0.0 -5.0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: Organization for Economic Co-operation and Development fred.stlouisfed.org US $, Sum Over Component Sub-periods/10000000O000Explain how changes in various economic factors affect a country's current account balance.What does symmetrical adjustment of current account imbalances mean?
- What could be the measures to correct disequilibrium in the balance of payments?Based on the Balance of Payments in the table below, what is the statistical discrepancy?A country has been experiencing a persistent deficit in its current account balance due to high levels of imports compared to exports, along with significant outflows of income payments and transfers. To address this issue, the government is considering implementing a range of policies, including devaluation of the currency, imposition of tariffs, and promotion of export industries. The goal is to correct the balance of payments imbalance and improve the country's international financial position. The question is: In this scenario, the primary objective of the government's policies is to: A) Increase the country's reliance on imports B) Decrease foreign investment in the country C) Correct the balance of payments deficit D) Eliminate all forms of international trade
- Based on the Balance of Payments in the table below, what is the statistical discrepancy (with positive or negative symbol)? Balance of Payments (1) Exports of goods and services (2) Goods (3) Services (4) Imports of goods and services (5) Goods (6) Services (7) Balance of goods and services (8) Income receipts on investments (9) Income payments on investments (10) Unilateral transfers (11) Current account balance (in billions of dollars) (12) U.S. owned assets abroad (Change in; Increase is a "-".) (13) Foreign-owned assets in U.S. (Change in; Increase is a "+".) (14) Net financial derivative transactions (15) Financial account balance (16) Statistical discrepancy 2,974 870 -2,400 -320 -980 260 20 1,420 -1,600 -250Consider the following annual transactions in Canada's current account. If Canadian exports of goods and services are $40 billion, imports of goods and services are $28 billion, net investment income is $5 billion, transfers by Canadians to foreigners are $2 billion and transfers from foreigners to Canadian citizens are $2 billion, then the current account balance (as an integer value) is?Jamaica's current account averaged US$-65.94M from 1987 until 2020, reaching an all-time high of US$153.47M in the first quarter of 2016 and a record low of US$-536.06M in the third quarter of 2012. The country recorded a current account surplus of US$53.64M in the fourth quarter of 2020. At present, Jamaica ranks 83rd out of a group of 172 countries being tracked by the World Bank in terms of current account balance. This is 27 places above the position seen 10 years ago. The current account is one of two primary components of the balance of payments. As a per cent of GDP, it provides an indication of the level of international competitiveness of a country. Usually, countries recording a strong current account surplus have economies which are heavily dependent upon exports revenues and have high savings ratings but weak domestic demand. On the other hand, countries recording a current account deficit have strong imports, low saving rates and high personal consumption rates as a…
- Which of the following is included in a nation's current account? a) Purchases of foreign assets b) Borrowings from abroad c) Foreign purchases of U.S. financial assets d) Investment income receipts e) Purchases of foreign real propertyU.S. goods exports +$ 390 U.S. goods imports - 520 U.S. service exports +145 U.S. service imports -107 Net investment income +12 Net transfers -22 Capital account -5 Foreign purchases of U.S. assets +156 U.S. purchases of foreign assets -49 The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The balance on the financial account was a A. $107 billion surplus. B. $102 billion surplus. C. $107 billion deficit. D. $102 billion deficit.View the data below for the exchange rate between the US dollar and the Japanese yen. How many yen could you get per dollar at the earliest date shown on the chart? Explain. How many yen could you get per dollar at the most recent date shown on the chart? Explain. Has the dollar appreciated or depreciated in value over time? Explain.