Answer the following questions related to international balance of payments. (a) Describe the government budget status and the international balance of payment status of the United States

Answer the following questions related to international balance of payments.

(a) Describe the government budget status and the international balance of payment status of the United States. If a country is running a government budget deficit,explain if such a deficit will contribute to a current account deficit

(5 marks)

(b) The U.S. current account deficit is largely attributed to the widening trade deficit with China. Discuss the major factors that contribute to the trade imbalance between these two countries.

(10 marks)

(c) Identify and analyse the measures that have been taken by policymakers in bothcountries to correct their trade imbalance.

(5 marks)

Question 3

Log on to the SIM Library e-Resources, Economic Intelligence Unit (EIU) Country Reports and access the latest issue of report on Malaysia.

(a) Discuss the current account balance of Malaysia and its holdings of international reserves over the period from 2007 to 2012, and explain the reasons leading to this trend.

(5 marks)

(b) Discuss the advantages and disadvantages to Malaysia of having large current account surpluses.

(5 marks)

(c) Describe the current exchange-rate regime that is adopted by the Malaysian central bank. Discuss the advantages and disadvantages of adopting this regime?

(5 marks)

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