Select all that are true regarding the balance of payments (BOP): O The balance of payments is an idea that holds over the long run since it depends on adjustments in the fx rate to alter supply and demand flows in fx market Since the balance of payments is market driven rather than policy driven (two opposing policies across the pair), it will be in equilibrium (i.e, equal to zero), like all markets The balance of payments theory suggests that the net investment flows and trade flows between two countries (currency pairs, excluding foreign reserves) should balance to zero (in flows less out flows) OThe balance of payments is unlikely to exactly balance since it relies on imperfect arbitrage across intenational boarders

QUESTION 2 In the long run, an increase in the nominal exchange rate is likely to lead to Note: Multiple answers are possible. O A. an increase in exports ) B. a decrease in exports C. an increase in imports D. a decrease in imports

Please help me with this questions. Thank you 1. Using the IS–LM–FX model, illustrate how an increase in the home country’sgovernment spending affects the home country. Compare the outcome when the homecountry has a fixed exchange rate with the outcome when the home currency floats. Foreach case, state the effect of the increase in the home country’s government spending(increase, decrease, no change, or ambiguous) on the following variables: Y, i, E, C, I,TB.  2. During the 1980s, the United States experienced “twin deficits” in the currentaccount and government budget. Since 1998 the U.S. current account deficit has grownsteadily along with rising government budget deficits. Do government budget deficitslead to current account deficits? Identify other possible sources of the current accountdeficits. Do current account deficits necessarily indicate problems in the economy? 3.  Suppose the Japanese government is considering two policies. One policy wouldinvolve increasing government…

If the forecast UK inflation rate is 5% and the forecast European inflation rate is 2% and the spot exchange rate is €1.20/£1. Then according to relative PPP which of the following statements is correct? Select one: a. O b. The euro is forecast to appreciate by 3% to approximately €1.236/£1 O c. The pound is forecast to depreciate by 3% to approximately €1.1650/£1 O d. The euro is forecast to depreciate by 3% to approximately €1.1650/£1 The pound is forecast to appreciate by 3% to approximately €1.236/£1

With a fixed exchange rate, what would be effective stabilization policy during a recession? O Expansionary fiscal policy O Contractionary fiscal policy O Expansionary monetary policy O Contractionary monetary policy