I’m working on a economics question and need a sample draft to help me learn.
Guyana is a country that uses the Guyana dollar (g). It has foreign reserves of $400 million. The government has issued 0 million worth of debt which is denominated in $US.
Assume Guyana discovers oil and, as a result, there is massive investment by SHELL oil company into extraction facilities with Guyana. This is before any oil is exported.
a. IF the Guyana dollar were initially floating at 200 g/$, would this investment be more likely to move the exchange rate to 300 g/$ or 100 g/$? Clearly explain how the $US S&D curves shift in the foreign exchange market (when measuring g/$).
b. Does this result in a BOP surplus or deficit or no change (clearly explain why)?
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