Q34. An unanticipated shift to a federal government surplus would cause the financial account to move to:

A)     deficit and the current account to move to surplus.

B)     surplus and the current account to move to deficit.

C)     deficit and the current account to move to deficit.

Q35. David Hendricks, an economist with Economic Weekly (a major magazine publication in South Africa), was discussing monetary policy, foreign exchange, and fiscal policy at a forum in Durban. During the forum he made the following two statements:

Statement 1: If the South African government pursues an expansionary monetary policy that is unanticipated, the likely effects include a decrease in its financial account component of the balance of payments and lead to a decrease in the foreign exchange value of the South African rand (ZAR).

Statement 2: If the South African government pursues a restrictive fiscal policy, this will tend to move the current account towards surplus and the financial account towards a deficit.

Are the statements made by Hendricks regarding monetary policy, foreign exchange, and fiscal policy correct?

With respect to these statements:

A)   only statement 1 is correct.

B)   both are correct.

C)   only statement 2 is correct.

[此贴子已经被作者于2009-1-13 14:31:52编辑过]

答案和详解如下：

Q34. An unanticipated shift to a federal government surplus would cause the financial account to move to:

A)     deficit and the current account to move to surplus.

B)     surplus and the current account to move to deficit.

C)     deficit and the current account to move to deficit.

Correct answer is A)

An unexpected shift to a larger budget surplus would cause a decrease in aggregate demand and a reduction in domestic interest rates. This reduced demand discourages imports, which moves the current account toward surplus. The real lower interest rates will encourage investment in the foreign country and discourage foreign investors form investing in the domestic currency. The financial account will move toward deficit.

Q35. David Hendricks, an economist with Economic Weekly (a major magazine publication in South Africa), was discussing monetary policy, foreign exchange, and fiscal policy at a forum in Durban. During the forum he made the following two statements:

Statement 1: If the South African government pursues an expansionary monetary policy that is unanticipated, the likely effects include a decrease in its financial account component of the balance of payments and lead to a decrease in the foreign exchange value of the South African rand (ZAR).

Statement 2: If the South African government pursues a restrictive fiscal policy, this will tend to move the current account towards surplus and the financial account towards a deficit.

Are the statements made by Hendricks regarding monetary policy, foreign exchange, and fiscal policy correct?

With respect to these statements:

A)   only statement 1 is correct.

B)   both are correct.

C)   only statement 2 is correct.

Correct answer is B)

Both statements are correct. An unanticipated increase in the growth rate of the money supply can be expected to drive down both real interest rates and the foreign exchange value of the rand. The decrease in real interest rates will make foreign investment relatively more attractive, leading to a decrease in the financial account (move it toward deficit). A more restrictive fiscal policy will likely decrease economic growth and real interest rates, leading to less import demand (current account moves toward surplus) and greater demand for investment outside the country (financial account moves toward deficit).