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Following a report of additional investing RISK in country A (the domestic currency, FA), the balance of payments re-equilibration occurs in which order? The DC
Following a report of additional investing RISK in country A (the domestic currency, FA), the balance of payments re-equilibration occurs in which order? The DC depreciates from the current account The foreign interest in X decreases Foreign agents increase their interest in exports (X) The relative price (RP) of exports (X) inreases (i.e. it takes more FC to buy the DC to trade in the same amount of X ) The DC depreciates from the financial account (DI or FI) Foreign agents decrease their demand of the domestic currency (DC) in the FX market to trade (X) The relative price (RP) of exports (X) dereases (i.e. it takes less FC to buy the DC to trade in the same amount of X ) Foreign agents increase their demand for the domestic currency (DC) in the FX market to buy export (X) The DC appreciates (current account)
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