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Essay / Research Paper Abstract
This 6-page paper answers questions about international finance. Gold standards, debt-servicing and fiscal policy v. monetary policy are discussed. Bibliography lists 3 sources.
Page Count:
6 pages (~225 words per page)
File: AS43_MTfinaecon.rtf
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Unformatted sample text from the term paper:
instruments would be balance of payments and trade. The latter, of course, is self-explanatory; it involves coordination and cooperation between nations. But balance of payments (which is kind of a
balance sheet for the nation) needs a little more explanation. Balance of payments is a countrys accounting record; much like an organization
has an accounting record of income and outflow, countries have the same. A countrys balance of payment includes exports and imports of goods and services, financial capital and financial transfers.
Much like an organizations balance sheet, a countrys balance of payment sheet must balance out to zero. What are some obstacles to successful international policy coordination?
According to Frankel (2005), three obstacles to successful international coordination are first, uncertainty as to the correct initial position of the economy; second, uncertainty as
to the correct objective and third, uncertainty as to the correct model that links policy actions to their impact on the economy. In other words, if there isnt an understanding
of where the economy might be headed globally, and if there are questions about policy actions and their impact on the economy, this could prove difficult when it comes to
coordination and cooperation between nations. Under a system of floating exchange rates and high capital mobility, is monetary policy or fiscal policy better suited for promoting internal balance?
Why? Lets break down this question by defining all the terms. Monetary policy is set by some kind of central bank (such as
the Federal Reserve), which controls the supply of money. Fiscal policy, on the other hand, is set and controlled by the national government, and includes taxes, tariffs and so on.
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