Assignment on International Economics

Added on - 29 Apr 2020

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Running head: INTERNATIONAL ECONOMICSInternational EconomicsName of the StudentName of the UniversityAuthors NoteCourse ID
INTERNATIONAL ECONOMICS1Table of ContentsAnswer to question 1:.................................................................................................................2Answer to question 2:.................................................................................................................3Reference List:...........................................................................................................................5
INTERNATIONAL ECONOMICS2Answer to question 1:There are numerous factors that influence the forex prices. Anything that creates animpact on the flow of money in a nation or between the countries might create an impact onthe currency value. Below stated are the factors that effects the foreign exchange markets areas follows;Inflation Rates:Modifications of the inflation rate in the market can lead to the change inthe currency exchange rates. A country having lower rate of inflation than the other countrywill witness a rise in the value of its currency (Deventer et al., 2013). A nation with constantlower rate of inflation presents a rising currency value whereas the nation with higher amountof inflation would witness a fall in the currency and is escorted by the rising interest rates.A nations current account or balance of payments:A nations current accountdemonstrates the balance of trade and earnings on the foreign investment. This comprises ofthe total amount of transactions together with the exports, imports, debts etc. If there is adeficit noticed in the current account because of the spending of currency on importation ofproducts, then the earnings generated through sale of exports results in depreciation (Bodie,2013). Therefore, the balance of payment fluctuates the exchange rate of a domestic nations.Government trade:A nation having government debt is less probable to obtain foreigncapital that ultimately results in inflation. Overseas investors would dispose their bonds in theopen market given that the market predicts the government debt within the specific nation(McMillan, 2013). As a result of this, a fall in the value of the exchange rate will comefollowing.Recession:When a nation witness recession the rate of interest will fall it ultimatelydecreases the chances of acquiring in the foreign market. As a result of this, the currency of
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