ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A a depreciating exchange rate combined with a high rate of inflation and falling productivity
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B a depreciating exchange rate combined with a low rate of inflation and rising productivity
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C an appreciating exchange rate combined with a high rate of inflation and falling productivity
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D an appreciating exchange rate combined with a low rate of inflation and rising productivity
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Detailed explanation-1: -Exports, earnings on investments abroad, and incoming transfer payments (aid and remittances) increase a country’s current account surplus. Imports, foreign investors’ earnings on investments in the country, and outgoing transfer payments lower a country’s current account surplus.
Detailed explanation-2: -A current account surplus means that the current account has a positive balance of payments. In other words, the exports of a country exceed the imports.
Detailed explanation-3: -Generally, higher interest rates increase the value of a country’s currency. Higher interest rates tend to attract foreign investment, increasing the demand for and value of the home country’s currency.
Detailed explanation-4: -It is due to an improvement in competitiveness, leading to higher demand for exports. If domestic demand is still relatively strong, but consumers are buying domestic goods, rather than importing. 17-Feb-2019