Answers_to_Assignment_One

Answers_to_Assignment_One - Answers to Assignment One 1...

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Answers to Assignment One 1. Balance of Payments. a. Of what is the current account generally composed? ANSWER: The current account balance is composed of (1) the balance of trade, (2) the net amount of payments of interest to foreign investors and from foreign investment, (3) payments from international tourism, and (4) private gifts and grants. b. Of what is the capital account generally composed? ANSWER: The capital account is composed of all capital investments made between countries, including both direct foreign investment and purchases of securities with maturities exceeding one year. 9. Currency Effects. When South Korea’s export growth stalled, some South Korean firms suggested that South Korea’s primary export problem was the weakness in the Japanese yen. How would you interpret this statement? ANSWER: One of South Korea’s primary competitors in exporting is Japan, which produces and exports many of the same types of products to the same countries. When the Japanese yen is weak, some importers switch to Japanese products in place of South Korean products. For this reason, it is often suggested that South Korea’s primary export problem is weakness in the Japanese yen. 10. Effects of Tariffs.
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Answers_to_Assignment_One - Answers to Assignment One 1...

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