Give an example of how the balance of payments provides information concerning exchange rate determination?
What will be an ideal response?
Answer: The balance of payments provides information that is useful in understanding the determination of exchange rates and the growth prospects of a country. Persistent, large current account deficits, especially ones that are primarily consumer driven, are often associated with currency crises in which the currency of the country with the deficit depreciates substantially and the country suffers a severe recession. Knowledge of the official settlements account indicates whether the country is gaining or losing international reserves. Massive increases in international reserves indicate that the central bank is resisting pressure for the currency to appreciate in value. Large capital account surpluses that are primarily driven by private sector investments indicate that foreigners find the assets of the country to be attractive investment opportunities.
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Which of the following situations is best described by the timeline shown below?
Date (Months) 0 1 2 3 4 5 Cash Flows -$250 -$250 -$250 -$250 -$250 -$250 A) You make payments of $250 per month for six months. B) You receive payments of $250 per month for six months. C) You make payments of $250 per month for five months. D) You receive payments of $250 per month for five months.
A government issued general obligation bonds to finance the construction of a new fire station. In the current year, the government incurred $107,000 of interest expense on the debt
This amount will be reported on the government-wide statement of activities as A. Expenses of the general government function. B. Expenses of the public safety function. C. Interest expenses of the governmental activities. D. An offset to interest earnings in the General Fund.