ECONOMIC

Economics

Economics

Evaluate with reference to their superiority and feasibility, how attempting to change price and income are policy options to resolve balance of payments disequilibria. Discuss the plausibility of such policy options for a country in the euro zone.

Introduction

The balance of payments account, which is a record value of the rights and debts arising between a given country and the outside world and the rules of engagement as a result of exchanges and transactions that arise between the residents in this country and their counterparts abroad during the period of time, usually years.

And the balance of payments of great importance for the reason that it is through the study of vocabulary reflects our degree of economic progress in this country and we can determine the financial position for the outside world, so it is often asked the International Monetary Fund of all its members to stop the balance of payments annually to the fact that this balance of the most important influences inaccuracies in the government centre outside of the member (Dow, pp. 303).

The fault is in certain sections of the balance and is usually the current account deficit as one of the largest accounts, which causes the inability to damage the national economy, which would negatively affect the value of local currency in the foreign exchange market as a result to view the local currency more than one application of foreigners by Therefore, authorities are using in this case, monetary and fiscal policies to address the imbalance (Dawson, pp. 211-241).

And there are many reasons leading to the occurrence of this disorder and perhaps most important:

Wrong Assessment of the Local Currency Exchange Rate

There is a close relationship between the balance of payments and currency exchange rate for the country if the exchange rate for the currency of a country larger than the real value, will the rules of engagement to the high prices of items of the same country from the viewpoint of foreigners, which leads to lower external demand and consequently a massage to an imbalance in balance of payments (Conway, pp. 57).

If you select either the currency exchange rate less than it should be the rules of engagement will lead to the expansion of exports versus imports, contraction also leads to an imbalance in the balance, so these imbalances often result in pressure and that contribute to the continuity of the imbalance in the balance.

Structural Reasons

And are the reasons for the indicators of structural national and particularly the structure of foreign trade (either exports or imports), in addition to their productive capacity and methods of advanced technical, and this applies perfectly to the case of developing countries, which is characterized by its export structure by focusing Commodity any reliance on commodity basic (agricultural or mineral or petroleum), where usually affected by this export to external factors embodied in the elasticity of foreign demand in global markets such as a change in consumer tastes and they left for such goods or in case of technical progress abroad lead to reduced ...