Q

Consider the following balance sheet for a bank (baht is the local currency): Assets Investment in the construction of a motorcycle factory that sells to local consumers Liabilities 100 million baht of savings deposits Due to austerity, the price of motorcycles drops from 200 baht to 100 baht. Which of the following statements is FALSE? O The bank will fail unless the central bank raises interest rates O The bank is at risk of debt-deflation O The bank faces maturity mismatch The bank is not directly exposed to exchange rate riskWhich of the following is a way a country facing both a current account deficit and a financial account deficit can balance its balance of payments? O Austerity causing internal devaluation O Increasing reserves in the central bank vault O Exchange rate appreciation O The central bank reducing interest rates