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Open Economy Macroeconomics

Question

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How can increase in foreign direct investment affect the price of foreign exchange?

Solution

An increase in foreign direct investment leads to increase in the supply of foreign currency, thereby, the price of foreign exchange falls.

Some More Questions From Open Economy Macroeconomics Chapter

What are the features of Balance of Payment Account?

Describe components of Balance of Payment Account.

What is meant by visible and invisible items in BOP Account? Give two examples of invisible items.

What is balance of trade?
or
Which two transactions determine BOT?
or
What is the difference between the values of exports and imports of goods called?
or
When will BOT show a surplus?
or
When is there deficit in BOT?
or
What is balance of visible items in BOP accounts called?

BOT shows a deficit of र 5,000 crores and value of imports are र 9,000 crores. What is the value of exports?

The value of a country’s import of goods is र 200 crores, and value of export is र 250 crores. Find out its BOT.

A country’s balance of trade is र (–) 60 crores and value of import of goods is र 100 crores. out value of export of goods.

What is meant by balance of payment (BOP) account?
or
What does BOP account record?
or
Where are borrowings from abroad recorded and why

Balance of payment always balances. Comment.

When does a situation of deficit/surplus in BOP arise?
or
Explain meaning of deficit in BOP.

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