Question: List some factors that could cause an increase in the
List some factors that could cause an increase in the credit items of the balance of payments and a decrease in the debit items. What would be the effect on the exchange rate (assuming that it is freely floating)? What effect would these exchange rate movements have on the balance of payments?
Answer to relevant QuestionsWhat policy measures could the government adopt to prevent the exchange rate movements in question 11?What explanations can you give for the increase in both unemployment and inflation in the 1970s?Why is it difficult to predict the size of the accelerator?Why might the relationship between the demand for money and the rate of interest be an unstable one?Using ISLM analysis, explain what would cause the aggregate demand curve to be steep.
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