When Countries Have Severe Balance of Payments Difficulties Caused by Unsustainable

question 48

Essay

When countries have severe balance of payments difficulties caused by unsustainable current account deficits, they can approach the International Monetary Fund (IMF) for assistance. In providing financial assistance, the IMF generally insists that the country implement a series of policy changes designed to reduce the deficit. These programs are controversial as they tend to focus on demand reduction. Explain why demand reduction would solve a current account deficit problem. Would a program designed to increase the nation's GDP growth rate be a method of reducing a current account deficit? Why or why not?

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Definitions:

Product Life Cycle

Refers to the stages a product goes through from its introduction into the market, growth in acceptance, maturity, and eventually its decline.

Promotion Needs

Requirements identified by a company to increase awareness or sales of its products through various marketing strategies.

Product Distributions

The process or strategy of making a product available for consumption by distributing it to the end consumer.

Brand

A name, term, design, symbol, or any other feature that identifies one seller's goods or service as distinct from those of other sellers.