Explain how a country with a current account deficit is a ripe candidate for currency devaluation
What will be an ideal response?
If, for example, Great Britain had a current account deficit, the holders of pounds would become nervous and shift their wealth into other currencies. In order hold the pound's exchange rate against the dollar pegged, the Bank of England would have to buy pounds and supply the foreign assets that market participants wished to hold. This resulting loss in foreign reserves, if large enough, would most likely force a devaluation by leaving the Bank of England without enough reserves to prop up the exchange rate.
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Kuznets's investigations of development suggested that income
a. generally becomes more unequal as development progresses b. generally becomes more unequal up to a point, then becomes more equal c. generally becomes more equal as development progresses d. generally become more equal up to a point, then become more unequal e. none of the above
The interest rate thought to have the most important impact on aggregate demand is the
A) short-term interest rate. B) T-bill rate. C) rate on 90-day CDs. D) long-term interest rate.