What is the difference between the Current Account and the Capital and Financial Account of the Balance of Payments Statement?.
What is the difference between the Current Account and the Capital and Financial
Account of the Balance of Payments Statement?
Question
Economics- Essay type questions, answer each question on a separate page.
1) Why are banks susceptible to collapse during bad economic conditions and why does this
lead to financial crisis and bank panics? Illustrate with a balance sheet for a bank both
pre and post-recession.
2) What is the difference between the Current Account and the Capital and Financial
Account of the Balance of Payments Statement? Can surpluses in one offset deficits in
the other? Explain using the U.S. situation as an example. Explain both the trade
balance and the difference between FDI and portfolio investment in the process of your
explanation.
3) What is the Value Added approach to GDP accounting? Illustrate with an example.
(class example is fine but not required) What is a VAT, and how is it related to this
concept? Explain why it is similar in effect to an income tax?
4) What is an exchange rate, and how is the rate determined in a flexible exchange rate
system? Illustrate your points by determining the U.S. dollar exchange rate for the
Swedish Krona. Illustrate your points with a supply and demand curve properly labeled.
Also show the factors that would shift the exchange rate over time.
