Finance Question I was not to sure of ?? 2 out of 50 ain't bad! Can U help?

Question

Briefly describe political risk and economic risk and their impact on a country’s currency value.

Briefly describe and explain the difference between the current account balance and the capital account balance.

Answer 1

the higher the political and ecnomic risk, the more negative impact is has on a countryy's currency value.   look at the crazy inflation in the s. american adn african countries where they have political turmoil, and crazy inflation (reduction in value of their currency) b/c of it.  in a way, a country's currency is like a check issued by a bank...it's only as good as the bank's word...i.e. if a govmt comes to power saying, we're changing the denomnation of our currency, or we're not honoring our bonds we issued 5 yrs ago, then the currency is worth that much less.