Aggregate demand will fall. It has to be repaid dissolving the following assets country holds 1. Foreign exchange deposits country has earned through the trade 2. Inward remittances done by nationals of that country staying abroad 3. Cash / Gold reserves 4. If any of the above is not present then taking short term loan from World bank or IMF Q 2. What option do countries like the United States‚ Japan‚ and Australia have to finance or cover a current account deficit that is not
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Account - purchases and sales of goods and services Financial Account - capital transactions Reserves Account - changes in official reserves Debit entry - purchase of domestic goods‚ services‚ or assets‚ or a decline in liabilities to foreigners. Credit Entry - sale of debit entry. Double entry book keeping ensures that debits = credits (sum of all transactions = zero). In the absence of official reserve transactions‚ financial account surplus must offset the current account deficit‚ vice versa
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Australian workers produce extremely low quality cars that cannot compete b. Australians prefer public transportation so few cars are sold in Australia c. Foreign individuals wanting Australia’s resources have driven up demand for Australian currency so Australians can purchase imported cars for fewer
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“The Yuan Goes Global” 1) How does the Chinese government limit the use of the Chinese currency‚ the RMB‚ on the global currency markets? Through the settlement of trade transactions‚ Chinese government can limit the use of currency on global currency markets. In the past‚ US dollars was the denominator of Chinese exports that back in 2009 there were only 1% of the $1.2 trillion Chinese exports were denominated in RMB while in 2011 the percentage had risen to 7%. This shows the Chinese government
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quarters‚ India has been quite watchful in its approach to embracing global economy. The issue of capital account convertibility is one such where the nation has tread very cautiously. A high-level committee to look into this matter‚ appointed by the Reserve Bank of India‚ on Friday recommended that India move to fuller capital account convertibility over the next five years and has laid down the roadmap for the move. So what is capital account convertibility? To put is simply‚ capital account convertibility
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or less. iii. Official Reserve Account Official reserve accounts covers all purchase and sales of international reserve assets of country such as gold‚ foreign currencies‚ special drawing rights an reserve positions in the IMF. b) Discuss any two (2) methods a country can adopt to rectify the deficit in its deficit in its balance of payments. (4 marks) Two (2) methods a country can adopt to rectify the deficit in its balance of payments are:- i. Currency Depreciation Government
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Bretton Woods Conference The Background During the World War I and World War II the international monetary system is split into several competing currency blocs‚ the fierce trade war between the global recession and nation. In the post-World War II‚ at the end of World War II‚ the U.S. dollar has enjoyed a unique and powerful position in international trade and also because British and American governments for consideration of national interests‚ ideas and design of post-war international monetary
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globalised world. The economies of all the countries of the world are linked directly or indirectly through asset or/and goods markets. This linkage is made possible through trade and facilitated by foreign exchange. The price of foreign currencies in terms of a local currency (i.e. foreign exchange) is therefore important to the understanding of the growth trajectory of all countries of the world. According to Esther Adegbite (2007) Exchange rate is said to be the “relative price of two “national monies”
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Woods‚ during which the system actually operated as envisioned under full convertibility‚ lasted only from 1959 through 1968. Associated with steady growth in world production and trade‚ these nine years and the preceding decade of movement toward currency convertibility are considered something of a golden age in contrast to the six-year debacle of the interwar gold standard. Yet‚ from the moment of full convertibility on current account transactions in 1959‚ the steady growth of official and private
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are: Supply currency‚ act as custodian of banks’ reserves and control value of Malaysian currency; Act as government’s banker and financial adviser; Ensure financial stability and strong financial structure; Act as commercial banks’ banker; Control and influence the country’s credit situation to ensure a stable economic growth rate First‚ supply currency; act as custodian of banks’ reserves and control value of Malaysian currency. The central bank is the sole issuer of currency in the country
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