Home / Questions / Explain why a merchandise trade deficit created by imports of consumer goods is more trou...
Explain why a merchandise trade deficit created by imports of consumer goods is more troublesome than a
merchandise trade deficit created by imports of capital goods.
7. Explain how the Federal Government’s attempts to control inflation can affect our current account balance.
8. Explain how a small amount of international debt can become a very heavy burden for a developing
economy.
9. Explain the automatic correction mechanism that drives a country’s current account balance to zero.
10. Explain the essential difference between fixed and flexible exchange rate systems.
11. If a disequilibrium occurs in the foreign exchange market, what are possible solutions? Why might
governments choose not to let the price of their currencies adjust to clear the market?
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