Question

1.The level of saving in Country A has historically been high relative to the level of domestic investment. Based on this information, which of the following statements are incorrect?

1. Country A’s net foreign investment has been relatively low.
2. Country A’s net exports have been relatively low.
3. Country A’s capital inflows must be positive.
4. Country A’s public saving is smaller than its private saving.

A) a

B) a and d

C) c and d

D) all of the above

2. Under the Bretton Woods system, a fixed exchange rate supported by central banks was known as a(n) ________ exchange rate; in the 1960s, this system confronted severs problems, including _______.

A) par; countries with overvalued currencies refused to devalue their currencies

B) fundamental; countries with overvalued currencies refused to devalue their currencies

C) fundamental; dollars held by foreign central banks exceeded gold reserves held by the U.S

D) par; dollars held by foreign central banks exceeded gold reserves held by the U.S

4.A persistent shortage of GBP at a given fixed exchange rate (in USD/GBP) is evidence that the GBP is ________ versus USD) This shortage can be reduced or eliminated through ________ of GBP.

A) undervalued; a devaluation

B) undervalued; a revaluation

C) overvalued; an appreciation

D) overvalued; a devaluation

Answer 1

Please, give me a rating. It will be appreciable. Thank you.

1) When The level of saving in Country A has historically been high relative to the level of domestic investment. when S > I, the income level of the economy falls. this will lead to fewer foreign investments, fewer exports, short of domestic investments lead to a higher rate of interest and this increases capital flows in the economy. private saving of the economy will be greater than public saving.

1. Country A’s net foreign investment has been relatively low.
2. Country A’s net exports have been relatively low.
3. Country A’s capital inflows must be positive.
4. Country A’s public saving is smaller than its private saving.

   So, D) all of the above are correct options.

2. Under the Bretton Woods system, all currencies exchange rate will be defined by there value per ounce of gold and then it will be converted into fixed dollar exchange rate, a fixed exchange rate supported by central banks was known as a Par, exchange rate; in the 1960s, this system confronted severs problems, including dollars held by foreign central banks, exceeded gold reserves held by the US Fed.

Option D) par; dollars held by foreign central banks exceeded gold reserves held by the U.S

4. When the GBP or any other currency under a fixed exchange rate system is undervalued in terms of dollars or other currencies, this will lead to a large demand for GBP. and when supply falls short of demand of a currency,  A persistent shortage of GBP at a given fixed exchange rate (in USD/GBP) is evidence that the GBP is Undervalued versus USD) This shortage can be reduced or eliminated through a Revaluation of GBP.

Option B) undervalued; a revaluation