Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(1) Does your country import more than it exports? Do its export earnings appear to be quite volatile, as we predict could be that case
(1) Does your country import more than it exports? Do its export earnings appear to be quite volatile, as we predict could be that case for those reliant on primary product exports? Are its imports quite volatile, perhaps a reflection of high oil prices or of big changes in its domestic income? If its balance of trade on goods is negative, does that also result in a deficit on the current account as a whole, or are there other entries that provide an important offset to that deficit? For most countries, a CA/GDP deficit greater than 4% or 5% in absolute value is unlikely to be sustainable in the long run. By that standard, did your country appear to need to reduce its deficit during this period?
(2) What allows the country to run a current account deficit? That is, how does the country finance that extra spending does it sell assets to foreigners or borrow from them? Is the current account a good predictor of the overall balance? If so, there may be little variation in the financial account from year to year, possibly because the World Bank lends a set amount of money and few other lenders are attracted to that country.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started