Q7

1. How GDP indicate that a country is in recession? Is Pakistan in recession after the pandemic spread? Explain through indicators.
2. Differentiate between hot money and bonds. These are the two strategies for addressing the current account deficit (CAD) of our country. In your opinion, considering the current situation, which strategy is effective in the long run?
3. Recently, SBP has reduced the interest rate to single digits. Calculate how many basis points have been reduced in the past three months? What can be the plausible reasons for reduction in the interest rate following the pandemic? Will our Current Account Deficit be effected and in what direction? (Hint: Inflation rate of Pakistan is 8.5%) (9 Marks)