Question

INSTRUCTIONS

1. YOUR GRADE DEPENDS ON YOUR CONVICTION, CORRECTNESS, ELABORATION AND ELUCIDATION OF YOUR ANSWERS.
2. YOU MUST DO 3 ESSAYS OF YOUR CHOICE. EACH COUNTS 17 POINTS.
3. YOU SHOULD WRITE ABOUT ONE PAGE SINGLE SPACED PER QUESTION

QUESTIONS

4. Describe the different accounts of the balance of payments.

5. Elucidate the 3 functions of the IMF at the current time.

6. Compare and contrast the IMF and the World Bank group in raising money for themselves.

7. How were the periods of before 1914 versus the period between 1914 to 1918 in terms of trade and capital flows?

8. Discuss the periods of 1944-1973 in terms of capital and trade flows. Why did the system fail?

9. Explicate the key reason that the US has been running deficits for the last close to 40 years, and presently, is the largest debt nation globally. The US net international Investment position is approximately $ 12 trillion.

10. Elaborate on the two reasons for trade. They are

a. (Factor Endowments Theory) Comparative Advantage

b. Demand reasons of Stephan Burmeister Linder

11.Two factors influence exports and imports of goods and services. They are competitiveness of the nation and the income level of it. Expound.

Answer 1

As per instructions I would like to attempt question n.o. 4 to question n.o. 6.

Ans.1. I would like to explain the different accounts of balance of payments: Balance of payments is classified into three ways:

1. Financial Accounts: In financial Accounts, all the investments related to bonds, securities, stocks are recorded. This accounts include also government securities hold by financial institutions like world bank, international monetary fund, New Development Bank etc. For. Example: Investors invest their money into financial securities is regarded as Financial Accounts.

2. Capital Accounts: In Capital Accounts, all the investments related to capital reserves, purchase, sale, acquisitions of business are recorded. Initially, all capital which is used in development of business and recorded as capital accounts. For. Example: Capital Invested by Investors for acquisitions of fixed assets is regarded as Capital Accounts

3. Current Accounts: In Current Accounts, all the investments related to inflows and outlflows of goods and services in any country is recorded. For Example: Remittances from foreign country to home country is regarded as Current Accounts.

Ans.2. I would like to explain the three functions of International Monetory Fund in the following:

Regulatory Functions: The international Monetary Fund is to regulate the international monetary system. It also ensures that every transactions are taken place in a fair manner.

Financial Functions: The International Monetary Fund also pursue the financial functions as it provides short-term and long-term loans to the members countries at the time of economic crises.

Consultive functions: The International Monetary Fund also pursue the consultive functions. It also provide consulation services to members countries for any investment projects.

Ans.3. I would like to compare and the IMF and World bank group in raising money for themeselves.

International Monetory Fund: There are two sources of raising funds by international monetary fund are members Quota and short-term or long-term loan. In case of members Quota, Members countries can increase their Quota by investing more money and also get special drawing rights. On the other hand, The IMF are providing Short-term Loan to the members countries and earn high interest rate, with these IMF raise funds.

World Bank: World Bank get its funds from global capital markets. The world bank issue short-term or long-term bonds to the members countries. The world bank also provide short-term and long-term loans to the members countries in which they are charging low interest rate to the developing countries or poor countries and high interest rate to the developed countries.