Page 40 - FINAL CFA I SLIDES JUNE 2019 DAY 6
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Session Unit 5:
20. Currency Exchange Rates
LOS 20.j: Explain the effects of exchange rates on countries’ international trade and capital flows., p.165
Balance of Payments is made of trade (X-M) balance and capital investment account
balance (inflows and outflows) ; so, any deficit in one needs to absorbed by surplus in the
other!
A trade deficit (X – M < 0) must be absorbed by excess of I over S or excess of G over T
