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Essay / Research Paper Abstract
This 12 page paper answers 4 questions concerning international economics. The first question looks at why and how the current account deficit will approximately match the inflow of money into the economy. The second question considers the way in which revaluation of a currency would impact on the measures in question one. The third question explains the meaning of interest rate parity, and the last part of the paper looks at the concept of boom and bust conditions including their potential causes and/or influences. The bibliography cites 10 sources.
Page Count:
12 pages (~225 words per page)
File: TS14_TEintexchangeec.rtf
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Unformatted sample text from the term paper:
the way in which the foreign exchange markets operate. Generally a deficit in the current account is seen as a negative influence, the current account, in general terms, measures
the difference between the imports and the exports, where a country has more exports than imports it is in surplus, as there is more money earned from the sale
of goods that are exported than is spent on the goods that are imported. If there is a deficit this means that the country is bringing in ore goods in
terms of value that are being exported, which is associated with the loss of jobs as more demand is supplied from outside the economy (Higgins and Kiltguaard, 1998). When
looking at the current account deficit in the US, which has increased over the last few years buy as the country buys more foreign goods, and uses the dollars to
make those purchases there ahs been an accompanying net inflow of capital which is helping to support the creation of jobs, and as such it is also helping to increase
the demand for goods, even if they are exported goods. It has been argued that it is in the interests of China to support the US economy as they are
a major purchaser of Chinese goods. Where there are large deficits this also has an impact on the value of a currency, if there is more on the market
outside of the domestic economy then the supply increases, unless there is demand that is equal to the supply, there is likely to be a fall in the value of
the currency, in turn this helps to make investment in the economy more attractive to external investors, and net investment is likely to result (Higgins and Kiltguaard, 1998). Research
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