BOP Govt policies! (1 Viewer)

[don_maka]

hey i'm having a bit of trouble with bop, could anyone shed some light on:

Government policies available to deal with the balance of payments issue:
The macroeconomic including- fiscal
-monetary
-trade policy

microeconomic policies and labour market policies that all deal with the bop issue.

thanks alot

 

[ComingUpForAir]

please don't take what Jolly said to heart, it's a very muddled paragraph.

Balance of payments breaks down into the Current account and the Capital account.

It must always be that the balance on these two accounts add to zero, so if there is a surplus in the current account, the is a deficeit in the Capital account.

The existence of a surplus/deficit in each account arises from a divergence between the local interest rate and the 'world' interset rate.

Relatively High interest rates -> capital account surplus and current acc deficiet
Relatively Low interest rates -> capital account deficiet and current acc surplus