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Author Question: Money is more mobile geographically now than in the past. Indicate whether the statement is true ... (Read 47 times)

azncindy619

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on: Jun 30, 2018
Money is more mobile geographically now than in the past.
 
  Indicate whether the statement is true or false

Question 2

Explain how a country with a current account surplus is a ripe candidate for currency revaluation.
 
  What will be an ideal response?


dpost18

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Reply #1 on: Jun 30, 2018
Answer to Question 1

TRUE

Answer to Question 2

If a country like Germany had a current account surplus, it would sell its currency in the foreign exchange market in order to keep it from appreciating. The German central banks would thus find themselves swamped with official reserves, and Germany would face the problem of having its money supply grow uncontrollably, a trend that would most likely drive up the domestic price levels and upset internal balance. Revaluation of the currency would thus be a viable solution to this problem.


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