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Nutka1998
3 months ago
6

If a local newspaper reported that the Malaysian government will shore up the sliding ringgit by working to cut record budget a

nd trade deficits,
a) According to the model in this chapter, would a reduction in the budget deficit reduce the trade deficit? Would it raise the value of the ringgit? Explain.
b) Suppose that a reduction in the budget deficit made international investors more confident in the Malaysian economy. How would this increase in confidence affect the value of ringgit? How would it affect the trade deficit?
Social Studies
1 answer:
Juliette [1.5K]3 months ago
3 0

Answer:

Indeed.

Explanation:

Lowering the budget will naturally cut down our expenses, which in turn will decrease the trade deficit. A trade deficit occurs when imports exceed exports. In simpler terms, it represents a situation where a country spends more than it generates in revenue.

If a cut in the budget deficit boosts global investors' confidence in Malaysia's economy, more investments will flow into various industries, thereby increasing the country's foreign reserves. This influx can elevate the value of the ringgit and improve exports, leading to a reduction in the trade deficit.

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