What effect will each of the following events have on the current account balance if the exchange rate is fixed? If the exchange rate is floating?

a. The Indian government raises taxes and income falls.

b. The Chinese inflation rate increases, and prices in China rise faster than those in countries with which China trades.

c. India adopts a contractionary monetary policy. Interest rates rise (and are now higher than those in other countries) and income falls.

d. The textile companies’ “Buy Japanese” campaign is successful, and Japanese consumers switch from purchasing imported products to buying products made in Japan.