Preview

Balance of Payments Mexico)

Powerful Essays
Open Document
Open Document
1792 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Balance of Payments Mexico)
CHAPTER 3 BALANCE OF PAYMENTS SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS

QUESTIONS

1. Define the balance of payments.

Answer:

The balance of payments (BOP) can be defined as the statistical record of a country’s

international transactions over a certain period of time presented in the form of double-entry bookkeeping.

2. Why would it be useful to examine a country’s balance of payments data?

Answer: It would be useful to examine a country’s BOP for at least two reasons. First, BOP provides detailed information about the supply and demand of the country’s currency. Second, BOP data can be used to evaluate the performance of the country in international economic competition. For example, if a country is experiencing perennial BOP deficits, it may signal that the country’s industries lack competitiveness.

3. The United States has experienced continuous current account deficits since the early 1980s. What do you think are the main causes for the deficits? What would be the consequences of continuous U.S. current account deficits?

Answer: The current account deficits of U.S. may have reflected a few reasons such as (I) a historically high real interest rate in the U.S., which is due to ballooning federal budget deficits, that kept the dollar strong, and (ii) weak competitiveness of the U.S. industries.

4. In contrast to the U.S., Japan has realized continuous current account surpluses. What could be the main causes for these surpluses? Is it desirable to have continuous current account surpluses?

Answer:

Japan’s continuous current account surpluses may have reflected a weak yen and high

competitiveness of Japanese industries. Massive capital exports by Japan prevented yen from appreciating more than it did. At the same time, foreigners’ exports to Japan were hampered by closed nature of Japanese markets. Continuous current account surpluses disrupt free trade by promoting protectionist sentiment in

You May Also Find These Documents Helpful

  • Better Essays

    Miss

    • 1074 Words
    • 5 Pages

    Solis, M. (1 February, 2013). Japan’s Trade Policy in 2013: Possibilities and Pitfalls. Retrieved 21 June 2013 from Brookings: http://www.brookings.edu/research/opinions/2013/02/01-japan-trade-policy-solis.…

    • 1074 Words
    • 5 Pages
    Better Essays
  • Good Essays

    1. [10 points] Can you explain why some economists argue that the large current account…

    • 742 Words
    • 4 Pages
    Good Essays
  • Better Essays

    Current political talks are focused on the impending trade deficit our country continues to run. Both candidates for the presidency have argued for ways in which they intend to bring balance to the economy. The United States has been running a consistent trade deficit with its trading partners since the 1970s (Budget of the, 2012). The Great Recession (2008-2012) saw huge deficits that are continuing to worry American citizens. Many Americans are asking the government to find a way to balance the federal budget. However, not all believe that trade deficits are bad for the economy. In fact, some would argue that growing trade deficits are showing that the economy is growing alongside income levels (Markheim,2010). The following will explore the balance of trade history while looking at contributing factors as well as observing important trade partners for the United States.…

    • 1130 Words
    • 5 Pages
    Better Essays
  • Good Essays

    WEEK 1 - 5 QUIZZES

    • 869 Words
    • 5 Pages

    1. In the U.S. current account, most of the trade deficit results from an excess of imported…

    • 869 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    International Business

    • 498 Words
    • 2 Pages

    4. The implications of Japan’s economic stagnation for the benefits, costs, and risks of doing business in this nation are huge. There is no growth in the country due to the people with money being retired…

    • 498 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Morrison, W. M., & Labonte, M. (2009, July 30). China’s holdings of U.S. securities: implications for the U.S. economy (RL34314). Retrieved from Congressional Research Service website: http://www.fas.org/sgp/crs/row/RL34314.pdf…

    • 1687 Words
    • 7 Pages
    Powerful Essays
  • Good Essays

    Whenever the U.S. has a deficit year, money is borrowed to pay for the deficit. Deficits are not a new concept as far as our nation’s history is concerned. Deficits were incurred during and after WWI. Then the country enjoyed a decade of annual budget surpluses until the Great Depression; and WWII only made it worse. The country never quite returned to the concept of living within its means since that time. This is not to say that there have not been any other years of budget surplus, but they have been few and far in between. However, up until 1975, the U.S. annual deficit has been rather miniscule compared to today’s standards. In 1975 is when the U.S. incurred a deficit that was almost as large as that…

    • 639 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Econ 305 Midterm

    • 1461 Words
    • 6 Pages

    a country that has a balance of payments surplus will have an increase in foreign reserves…

    • 1461 Words
    • 6 Pages
    Powerful Essays
  • Best Essays

    South Africa

    • 4875 Words
    • 20 Pages

    South Africa has the largest economy in Africa. South Africa’s economy has been growing at almost 5% a year for the past several years 32 consecutive quarters of positive growth. Not only is South Africa itself an important emerging economy, it is also the gateway to other African markets.…

    • 4875 Words
    • 20 Pages
    Best Essays
  • Good Essays

    A budget deficit is described as the difference in the funds that the government collects in taxes and what is spent. In 2001 the economy was at $128 billion surplus and has steadily decreased to a $1.327 trillion deficit in 2012. It is currently projected that by 2013 the deficit will be down to $901 billion (Amadeo, 2012). A popular question is whether the source of a deficit really matters or not, the concern is the fact that the United States is in debt. Many Americans want to place the blame of the high deficit on the financial crisis that began in 2008 or even the President. As stated by Case in the text, “Voters appear to hold the party that is in power in the White House accountable for the economy. Voters tend to favor the incumbent-party candidate if the economy is good (high output and low inflation) and vote against the incumbent-party candidate if the economy is bad (low output and high inflation) “(Case 101). There are many factors, controlled and some uncontrollable, that contributes to the formation of a budget deficit. In order to understand a deficit and attempt to decrease it, the source and reasoning of the deficit needs to be determined.…

    • 1247 Words
    • 5 Pages
    Good Essays
  • Powerful Essays

    In conclusion, stated by John Dower in “The Useful War” Japan has went through a period of drastic economic growth and development after the end of the World War II, yet apparently faced an economic depression and recession that Japan experiences even at present (Dower). Japan is famous for its industrial advances and robotics. Service industries appear to be rather popular too, and Japanese government further privatizes state-own strategic corporations. The government cooperates greatly with the most favored companies of Japan while places numerous trading barriers on imported goods. Japan has experienced major problems in the past like property bubbles, reliance on large corporations, unwillingness to open Japanese market to foreign goods, and bank and financial problems. At present Japan as two major problems that can be resolved quickly namely, market inefficiencies and lack of consumption. The problems that are unlikely to be changed and resolved are the opportunity/competitiveness lost and dependence on foreign…

    • 1586 Words
    • 7 Pages
    Powerful Essays
  • Powerful Essays

    Maroeconomices

    • 3359 Words
    • 14 Pages

    4. If a country has an official settlements balance surplus so that the exchange rate value of the country's currency is experiencing upward pressure:…

    • 3359 Words
    • 14 Pages
    Powerful Essays
  • Satisfactory Essays

    The bank savings of a country also have significant impact on the overall global imbalances. When the bank savings are increased, the imbalances are shown to go down and vice versa. Some of the countries deliberately increase the foreign exchange reserves in their economy in order to avoid any form of deficit in the balance of payment.…

    • 476 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    ACCTG1A REVIEWER

    • 2347 Words
    • 8 Pages

    7. Writing down of business transactions chronologically in the books of account as they transpire…

    • 2347 Words
    • 8 Pages
    Good Essays
  • Satisfactory Essays

    Minicase3 Answer

    • 399 Words
    • 2 Pages

    role they do or should play in a country’s balance of payments , and more…

    • 399 Words
    • 2 Pages
    Satisfactory Essays