Chapter 48 - Policies to correct disequilibrium in the balance of payments

Question 1

Net Errors and Omissions

Answer 1

A Figure included to ensure the balance of payments balances; sometimes called the balancing item.

Question 2

Financial Account

Answer 2

• Direct Investment
• Portfolio Investment
• Other Investments
• Reserve Assets

Question 3

Expenditure Switching Policy

Answer 3

Policy tools designed to encourage people to switch from buying foreign produced products to buying domestically produced products.

Question 4

Expenditure Reducing Policy

Answer 4

Policy tools designed to reduce imports and increase exports by reducing demand.

Question 5

Progress and development

Answer 5

An inflow of direct and portfolio investment can have an impact on progress and development. There are debated about whether multinational companies promote or harm development.

Question 6

The role of government and issues of equality and Equity

Answer 6

Expenditure-switching policy tools may increase inequality if they increase unemployment.