Question
Hello, I am having trouble solving the following questions. Any help is appreciated We observe a country is running a current account deficit imports of
Hello, I am having trouble solving the following questions. Any help is appreciated
We observe a country is running a current account deficit imports of goods and services exceed exports of goods and services.(Check all that are correct):
1.If the country has a floating exchange rate:
a.The central bank is losing reserves.
b.The central bank could be gaining or losing reserves depending on capital flows.
c.The current account deficit is equal to the capital and financial account surpluses.
d.The country is transferring real resources on net to other countries.
2.If the country has a fixed exchange rate:
a.The central bank is losing reserves.
b.The central bank could be gaining or losing reserves depending on capital inflows. (unsure because of sterilization)
c.The current account deficit is equal to the capital and financial account surpluses.
d.The country is gaining real resources on net from other countries.
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