Exam 9: The Exchange Rate and the Balance of Payments

If the prices in the United States rise faster than those in other countries,

Consider the market for dollars. The higher the exchange rate, the is the expected profit from holding foreign currency and the greater is the .

If the U.S. government increased its holdings of British pounds, definitely

The the exchange rate, the are foreign- produced goods and hence the smaller the quantity of dollars supplied.

-The figure above illustrates the U.S. foreign exchange market. Illustrate how the exchange rate changes if the expected future exchange rate falls. Does the dollar appreciate or depreciate?

The higher the dollar's exchange rate, the the expected profit from holding dollars and so Dollars are supplied.

-In the table above, what do net exports equal?

Suppose the current account of a country is in balance and the official settlements account equals 0. A new transaction occurs so that the current account is now in surplus, but the official settlements account does not change. From this we know that

If the U.S. dollar depreciates, then

This year a country loaned more to the rest of the world than it borrowed from the rest of the world. In addition, the country has invested more in the rest of the world than other countries have invested in it. The country is currently a and also a .

The demand for one money is the supply of another money.

Saving is S, investment is I, net taxes is NT, government expenditure is G, exports is X, and imports is M. Using these symbols, what is the relationship among the saving, investment, net taxes, government expenditure, exports, and imports?

If the pound- dollar exchange rate changes from £0.60 per dollar to £0.65 per dollar, then the pound has _ against the dollar and the dollar has _ against the pound.

-The above table gives data for the nation of Sueland. What is the private sector surplus or deficit?

If U.S. official reserves increase, is the official settlements account balance positive, negative, or unaffected?

If the target exchange rate is 100 yen per dollar and the current exchange rate is 90 yen per dollar, the Fed will

If the exchange rate falls from 120 yen per dollar to 100 yen per dollar, the dollar has _ and the yen has .

An increase in the U.S. demand for imports will the supply of dollars and lead the dollar to .

-The figure above shows the demand and supply of dollars in the foreign exchange market. The equilibrium in the market occurs at a price of Brazilian reals per dollar and a quantity of Billion dollars.

The exchange rate can be influenced by a nation's central bank.