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Q. Why do governments prefer to avoid current account deficits that are too large?
Answer: A current account debit may possibly pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future. Though sometimes large current account deficits represent temporarily high consumption resulting from misguided government policies or some other malfunctioning of the economy occasionally the investment projects that draw on foreign funds may be badly planned and so on. In such cases the government strength wish to reduce the current account deficit immediately rather than face problems in repaying its foreign debt in the future.
Why Adam Smith theory cannot be applicable?
TERMS OF TRADE MEANING AND NET BARTER TERMS OF TRADE MEANING TABLE DIAGRAM
Q. An export subsidy has the reverse effect on terms of trade to the effect of an import tariff. Domestically a tariff will raise the price of the import good, deteriorating the
theory of opportunity cost?
curve
Why we Devising an International Monetary System
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Opportunity cost theory
Q. Explain why in exchange rate-based stabilization plan may result in a real appreciation? Answer: annotation 8 gives three reasons: first, persistent inflation because of s
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