Author Question: Why might a country like Brazil have to offer a much higher interest rate on its government bonds ... (Read 83 times)

tsand2 · **on:** Jun 29, 2018

Why might a country like Brazil have to offer a much higher interest rate on its government bonds than those offered by the Great Britain?

What will be an ideal response?

Question 2

What is the relationship between the balance of trade and the current account balance?

What will be an ideal response?

itsakadoozi · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Potential bond holders perceive that Brazil is a greater credit risk than Great Britain and therefore must be compensated for taking on that risk.

Answer to Question 2

The balance of trade measures the difference between the value of the goods a country exports and the value of the goods a country imports. If a country's exports of goods are greater than its imports of goods, there is a trade surplus, which increases the current account balance. However, the balance of trade is not the only component of the current account balance. The balance of services (exports of services minus imports of services), net income on investments, and net transfers are also included in the current account balance.