: Explain how a country’s balances of payment directly affect the exchange rate.

Expert Solution

the balance of payment of a country directly affects the exchange rate and consider the balance of payment is negative where one of the main reasons for balance of payment is excess of imports. In this regard devaluation of currency or increase in the exchange rate with respect to other currency is done because the disequlibrium in the balance of payment where more deficit is in place, what happens is that the imports become more costly here because you have to spend more amount of home currency to get one unit of foreign currency as a result of which you import less and the exports can increase due to the exports becoming cheaper for the foreign countries does a result of which the exports increase and ultimately the balance of payment can be corrected and in this way balance of payment is directly related to exchange rate where high deficit cause devaluation and low deficit or surplus can cause appreciation of the currency

Rahul Sunny answered 2 years ago

Explain how an increase in the savings rate would affect a country’s present standard of living,...

Explain how an increase in the savings rate would affect a country’s present standard of living, and the future standard of living. Would an increase in the savings rate permanently or only temporarily affect the growth rate? Explain. Note: (Please answer all parts, it's the same question. NO Handwriting please, I have difficulties understanding the handwritings, unfortunately.)

1.1. Explain why a decline in a country’s exchange rate will generally increase the demand for...

1.1. Explain why a decline in a country’s exchange rate will generally increase the demand for its goods and reduce its demand for foreign goods. 1.2 Increased U.S. inflation, relative to other trading partner nations, should have what impact on the value of the U.S. dollar? Explain thoroughly. 1..3 Explain financial intermediation and its benefits.

How does foreign exchange Reserves affect the payment to the US Exporter?

Explain how a depreciation of a country’s currency can affect the economy of the country.

Assume that a war reduces a country’s labor force but does not directly affect its capital...

Assume that a war reduces a country’s labor force but does not directly affect its capital stock. If the economy was in a steady state before the war and the saving rate does not change after the war, then, over time, what can you say about the growth rate of capital per worker and output per worker as compared to before he war?

Which three factors most directly affect the demand for a country’s currency on the international currency...

Which three factors most directly affect the demand for a country’s currency on the international currency market? 1. Central Bank actions to increase or decrease the money supply 2. the demand for the country's goods and services 3. the exchange rate with other currencies 4. strong economic growth 5. the demand for financial assets from that country

Explain how a decrease in productivity growth is likely to affect a country’s macroeconomic performance (detailed...

Explain how a decrease in productivity growth is likely to affect a country’s macroeconomic performance (detailed answer please)

What are the mechanics of maintaining a fixed exchange rate? That is, what must a country’s...

What are the mechanics of maintaining a fixed exchange rate? That is, what must a country’s central bank do in order to prevent the value of one’s currency from going up or down?

In determining the exchange rate of the country’s currency dominated by markets or by official action,...

In determining the exchange rate of the country’s currency dominated by markets or by official action, there are four categories: Soft pegs, hard pegs, residual, floating arrangements. Please describe the categories in short

2.(a) Mark X if True ____ Exchange Rate is the # of units of one country’s...

2.(a) Mark X if True ____ Exchange Rate is the # of units of one country’s currency you need to buy one unit of another country’s currency. _____ FX Rate can impact a nation’s international trade since it affects I/B pricing/profit. _____FX also impacts a country’s wealth and its ability to trade internationally and build its BOP . (b) The world’s largest FX Markets are: (1) __________ (2) ______________ (3)__________ (4) ______________ 3. Mark X if True. The following...

Question