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Briefly explain the factors that cause a shift in the balance of payments curve

Briefly explain the factors that cause a shift in the balance of payments curve

Answers

Dana
A change in the exchange rate: an appreciation of the exchange rate will cause a shift of the balance of payment curve to the left. A rise in the level of the Kenyan currency will make Kenyan goods more expensive for foreign buyers and foreign goods less expensive for Kenyan buyers. As a result, the exports decline and the imports increase causing the balance of payment curve to shift to the left due to the decline in the net export balance and vice versa
A change in the ratio of domestic to foreign prices: an increase in the ratio will make Kenyan goods more expensive holding all other factors constant. This leads to a reduction in the next export balance hence the balance of payment curve shifts to the left and vice versa
Dana05 answered the question on August 14, 2019 at 07:33

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