Bilateral Exchange Rates

[@munroopphagura8838]

I get that you would say that a fall in the exchange rate would increase demand for exports and reduce demand for imports and so improve the current account deficit of the USA to some extent but what evaluation would you use for the comment on question. Would you talk about why the current account deficit has not increased as much as you would expect i.e because of the Marshall Lerner condition, rise in investment into the USA from China

[@gconomics3766]

Comment requires you to assess reasons why a depreciation in the EER might not lead to a significant improvement in the US current account position. There are numerous reasons such as time lags, quality, movements in the the value of other currencies etc.

[@lukefiler22]

If this came up, for the evaluation part would you mention that it's an effective exchange rate and so it's not known what the exchange rate between the USA and China is?

[@mohamedhabib4521]

That wouldn't be particularly strong evaluation but you could mention it. The go-to L4 response for this question would probably be the J-Curve effect and the Marshall Lerner condition

[@gconomics3766]

Definitely worth a mention. It would be wise to start your answer with a definition of the EER.

[@shentanya9187]

Hello.could you help me that type the 10 marks questions down here because i cannot hear very clearly.thank you very much.

[@lukefiler22]

Comment on the extent to which the change in the effective exchange rate index of the USD will have contributed to the change in the USA's current account deficit

[@shentanya9187]

thank you very much!

[@simplyanike3152]

G Conomics Thanks for the video, very helpful, but could you please simplify the question for me? I don't really understand it Thank You

[@gconomics3766]

The question relates to the link between the exchange rate and the current account. The EER depreciates over the time period shown; however, the USA's current account deficit shrinks only by half. The question asks you to explain this relationship and then outline possible reasons why the deficit is not completely cleared.

[@simplyanike3152]

Thank you