Lets+make+some+questions+up+ourselves

The Indonesian rupiah continued to depreciate against the US Dollar in July, breaching the IDR10,000/USD on 15 July 2013 for the first time since early September 2009.  The depreciation of the Indonesian rupiah follows a widening current account deficit during the second quarter of 2013; the deficit widened to USD9.85 billion compared to USD5.82 billion during the previous month. Bank Indonesia expects that the present wave of depreciation will help stem this trend as imports become dearer, enhancing the competitiveness of its industries, at least in the long run. However, Bank Indonesia recognises that both weaker global demand and domestic demand mean that growing exports may take some time to translate into stronger economic growth. At present, Bank Indonesia has indicated that the depreciation of the rupiah is presently in line with macroeconomic fundamentals, although it will continue to intervene to prevent volatile exchange rate movements. Indeed, sharply reduced international reserves (at least in absolute terms) mean that Bank Indonesia is more likely to allow the currency to depreciate, intervening only to avert pernicious movements on its foreign exchange market. Source: :[|__http://www.ceicdata.com/en/blog/rupiah-depreciates-amid-high-current-account-deficits#sthash.6njSVRmH.dpuf__] a)Define the following terms: i) Depreciation (2) ii) Current Account deficit (2) b)Explain using a diagram how a Balance of payments deficit contributes to a depreciating rupiah (4) c)Explain using a diagram how “both weaker global demand and domestic demand mean that growing exports may take some time to translate into stronger economic growth.” d)“Bank Indonesia is more likely to allow the currency to depreciate” What are the advantages and disadvantages of such a policy? (8)