Author Question: The official settlements balance or balance of payments is the sum of A) the current account ... (Read 89 times)

arivle123 · **on:** Jun 30, 2018

The official settlements balance or balance of payments is the sum of

A) the current account balance, the capital account balance, the non reserve portion of the financial account balance, the statistical discrepancy.
B) the current account balance and the capital account balance.
C) the current account balance, the capital account balance, the non reserve portion of the financial account balance.
D) the current account balance and the non reserve portion of the financial account balance.
E) the current account balance and the interest in all investments.

Question 2

Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of an increase in the U.S. money supply on the dollar/euro exchange rate.

What will be an ideal response?

nixon_s · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A

Answer to Question 2

An increase in the U.S. money supply will cause interest rate to decrease. This should increase investment and possibly consumption of durable goods. The reduction in the interest rate will cause a movement to the left along the schedule depicting the expected euro return expressed in dollar. The result is an increase in E or a depreciation of the dollar.