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The following transactions should be classified in the U.S. balance of payments accounts in what way? Would they be recorded in the financial account (as a sale of assets to or a purchase of assets from a foreigner) or the current account (as a payment to or from a foreigner)? What adjustments will be made to the current and financial accounts' balance of payments? a. A French importer spends $500 on a case of California wine. b. A French corporate employee who is an American puts her paycheck drawn on a Paris bank into her San Francisco bank. c. An American pays a Japanese corporation$10,000 to purchase a bond. d. Following a poor harvest, an American organisation sends $100,000 to Africa to assist locals in purchasing food.
Our task is to imagine that there is an equilibrium in the foreign exchange market, and there is a fixed exchange rate regime.
We have to answer/explain how government must react to keep the exchange rate fixed in a case when there is an increased demand from abroad for domestic goods and services.
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