Question 1 (a)
The effect of the decrease in consumption spending
Question 1 (e)
As a result of the increase in interest rate, the growth rate will fall.
The investment spending decreases and, as a result, capital formation will decrease.
Question 2 (a)
Current account record:
A United States resident buys chocolate from Belgium
A United States manufacturer buys computer equipment from Japan.
Question 2 (b)
- Increase in income causes imports to increase, therefore the current account balance will decrease or move toward a deficit.
Question 2 (c)
The effect of an increase in United States firm's direct investment in India
X-axis: Quantity of US Dollars
Y-axis: Rupee per US Dollar