week 2 BOP

Question 1

what are reserves and what do they do

Answer 1

Reserves say something about how the government influences the exchange rate. Gov’s can use it to gain forex or loose forex

Question 2

what happens when currency depreciates?

Answer 2

imports become more expensive, because own currency is worth less in relation to another. exports become cheaper

Question 3

what does the capital account include?

Answer 3

it includes physical assets and intellectual property.