BA1 Leak Questions

Balance of payments deficits and surpluses are automatically corrected.

There is no danger of long term undervaluation or overvaluation of the currency.

The prices of imports and exports change as the supply and demand for the currency change.

Balance of payments adjustment occurs without any effect on the domestic economy.

Signaling of consumers' requirements

Allocation of adequate resources for future investment

Rationing of scarce resources between potentially unlimited demands

Setting of rewards to factors of production

Net savers and net borrowers are brought together.

Banks create credit on the basis of their liquid assets.

The central bank acts as a link between commercial banks and the government.

Banks provide commercial services for their customers.

Governments sought to reduce aggregate demand to avoid a boom

Households and firms were unwilling to borrow

Banks had lost reserves and could not support high lending

Households had stop saving due to loss of confidence in commercial banks