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Deepak Parai Finance HW 3

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6 views4 pages

Deepak Parai Finance HW 3

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Deepak Parai
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© © All Rights Reserved
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Chapter 3 Questions

If a country has a big surplus, it means it exports more than it imports. This could make the
currency stronger and possibly require tighter monetary policy to keep inflation in check. On the
other hand, a deficit could mean that the country needs to bring in more foreign investment,
which could lead to changes in policy that make it easier for people to invest.
Large capital inflows, like foreign direct investment (FDI) or portfolio investments, show that
foreign investors are confident in the economy and that the economy is stable. This could lead
to policies that make it easier for foreign companies to invest, such as tax breaks and less strict
rules. If there are big outflows of capital, there may be limits on capital transfers or policies to
keep the currency stable and keep domestic capital.
When foreign exchange reserves increase, it usually means that a country has a lot of foreign
currency. This can happen because of trade surpluses or capital inflows. If this happens, the
central bank may step in to control the exchange rate. If reserves start to drop, it could mean
that the economy is under stress or that money is leaving the country. To stabilize the economy
and win back investor confidence, steps like controlling the currency or changing policies may
be needed.

a. Financial account (Credit): portfolio investment liabilities.

b. Current account (Debit): goods and services (import of goods).

c. Current account (Credit): services (educational services export).


d. Current account (Debit): goods and services (import of goods).

e. Current account (Debit): income (payments to foreign nationals).

f. Current account (Debit): services (travel and tourism).

g. Financial account (Debit): errors and omissions or illegal transactions (illegal capital flight).

h. Financial account (Credit): portfolio investment liabilities.

Chapter 3 Problems

Balance on Goods :

2006: -9,596

2007: -17,784

2008: -4,915

2009: -4,439
2010: 17,479

2011: 22,481

2012: -12,186

2013: 4,480

2014: 453

2015: -19,313

Balance on Services :

2006: 869

2007: 588

2008: -3,098

2009: -1,351

2010: -4,345

2011: -10,244

2012: -12,371

2013: -14,427

2014: -9,309

2015: -7,553

Balance on Goods and Services :

2006: -8,727

2007: -17,196

2008: -8,013

2009: -5,790

2010: 13,134

2011: 12,237

2012: -24,557

2013: -9,947

2014: -8,856

2015: -26,866

Current Account Balance :


2006: -33,306

2007: -57,631

2008: -42,170

2009: -45,560

2010: -40,752

2011: -55,498

2012: 4,239

2013: -23,683

2014: -23,012

2015: -28,411

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