Questions and Topics We Can Help You To Answer

Part 1: TOPIC FORUM – Please write 400 words or more per question. Topic Responses will be critically graded on the thought quality of the response, work effort including the requirements for minimum length and number of references, research, and analysis. Write and edit the response in Microsoft Word, use the Spelling and Grammar Tool, and then copy and paste it into a reply to the topic thread in that week’s forum. All postings should meet professional standards in content, punctuation/writing style, and APA guidelines for citation of sources and should run approximately 400 or more words (4 – 5 paragraphs) per question; a minimum of 3 reference sources outside of the textbook is required.

Your responses should be thoughtful and representative of graduate intellectual ability. The purpose of this assignment is to reinforce the chapter learning materials in alignment with the course learning outcomes and to bring a deeper understanding of content through research, analysis, and examples on broader topics that go beyond the text.  

Question #1 Of what is the current account generally composed? Is a current account deficit something to worry about? Why don’t exchange rates always adjust to correct current account deficits?

Question #2 The currencies of some Latin American countries depreciate against the U.S. dollar on a consistent basis. The governments of these countries need to attract more capital flows by raising interest rates and making their currencies more attractive. They also need to insure bank deposits so that foreign investors who invest in large bank deposits do not need to worry about default risk. In addition, they could impose capital restrictions on local investors to prevent capital outflows.
On the other hand: some Latin American countries have had high inflation, which encourages local firms and consumers to purchase products from the U.S. instead. Thus, these countries could relieve the downward pressure on their local currencies by reducing inflation. To reduce inflation, a country may have to reduce economic growth temporarily. These countries should not raise their interest rates in order to attract foreign investment, because they will still not attract funds if investors fear that there will be large capital outflows upon the first threat of continued depreciation.
WHO IS CORRECT?