Question

Referencing the international flow of funds, which of the following represents aid, grants, and gifts from one country to another?

Group of answer choices

1.Primary income

2.Secondary income

3. Pass Through income

4. The Capital Account

why would a government 'revalue' their currency? (select the best answer)

Group of answer choices

1. reduce inflation

2. stimulate local economy

3. increase trade surplus

4. to lower interest rates

Answer 1

Answer for Q1- 2 - Secondary Income

Secondary income refers to transfers recorded in the balance of payments whenever an economy provides or receives goods, services, income, or financial items without a quid pro quo. All transfers not considered to be capital are current.

Unilateral Transfer Account/ Current Transfers- The account includes gifts, grants, remittances received from foreign countries and paid to foreign countries. Current transfers are current account transactions in which a resident entity in one nation provides a nonresident entity with an economic value, such as a real resource or financial item, without receiving something of economic value in exchange.

Answer for Q2- To lower Interest Rate & Stimulate local economy

A revaluation is a calculated upward adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can include wage rates, the price of gold, or a foreign currency.

Causes for Revaluation-

Some of the causes include :

1. Changes in the interest rates between various countries and large-scale events that affect the overall profitability, or competitiveness, of an economy.

2. Changes in leadership can also cause fluctuations because they may signal a change in a particular market’s stability.

3. A country can also revalue its currency to counter the negative effects of devaluation, to pay-off foreign-denominated loans, to reduce interest payments for foreign bonds.