Nfa of the emerging economy

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Imagine a world with only two economies: one advanced economy and one emerging economy. If the advanced economy is running a large negative NFA position then:

a) What can you say about the NFA of the emerging economy?

b) Now imagine that the emerging economy has been accumulating reserves and has invested them at the advanced economy's interest rate. If the advanced economy's interest rate decreases what can you say will happen to the advanced economy's NFA position and its current account?

c) Explain in one or two sentences if this world is experiencing a global imbalance.

Reference no: EM133115192

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