Comments of current account in balance of payment-00561
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vu cs401 Computer Architecture and Assembly Language Programming.
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vu cs401 Mid Term Solved Past Paper No. 3.
Question 1: Comments of current account in balance of payment
Answer:
THE CURRENT ACCOUNT
The current account balance is essentially the trade balance (exports minus imports), but with net factor receipts from abroad added. If the exchange rate is fixed, then changes in reserves must mirror the combined balance on the current and capital accounts in order to bring the overall BOPs to zero. If the exchange rate is floating, then changes to reserves can remain zero, as the adjustment burden is borne by the exchange rate which appreciates (depreciates) in response to a joint surplus (deficit) on the current and capital accounts.
