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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 appreciates The fx re-equilibrates to a new equilibrium Foreign agents increase their demand for the domestic currency (DC) in the FX market to invest (DI) Foreign agents decrease their interest in domestic investment (DI) Foreign agents decrease their demand for the domestic currency (DC) in the FX market to invest (DI) The DC depreciates The foreign interest in DI increases The relative price (RP) of DI decreases (i.e. it takes less FC to buy the DC to invest in the same amount of DI)
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