Explain how is the activity reflected on the balance

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Reference no: EM1365346

A) Explain how is the activity reflected on the balance on current (BCA) account different from the activity reflected on the capital and financial accounts (BFA)? Why does the sum of the BCA + BFA + changes in official reserves equal zero?
B) Draw the fundamental analysis of the supply and demand curve for the British pound in terms of dollars. (The quantity of pounds on the horizontal axis and the US dollars per pound on the vertical axis - see 33-2.) What will happen to the exchange rate for each of the following events:
a) The UK economy booms
b) UK prices rise relative to world prices
c) UK interest rates rise relative to world interest rates

Reference no: EM1365346

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