Balance of payments and exchange rates Flashcards
1
Q
What is a country’s current account?
A
Records international flows of goods, services, income and transfer payments
2
Q
What is a country’s capital account?
A
Records transactions involving capital
3
Q
What is the current account divided into?
A
- Visible account
- Invisible account
- Current transfers
4
Q
Why could a current account deficit be healthy?
A
If it involves a country borrowing from abroad to finance investment and real economic growth
5
Q
What is the role of the IMF?
A
- Provision of foreign currencies
- Provision of world liquidity
- The SDR
6
Q
What does the IMF stabilisation programme include?
A
- Fiscal contraction
- Monetary contraction
- Devaluation of exchange rate
- Liberalisation of economy
7
Q
What are some criticisms of the IMF stabilisation programme?
A
- Inappropriate
- Inflexible
- Support inadequate and too expensive
- Dominated by major industrial countries
