Exam 9: The Exchange Rate and the Balance of Payments

A factor helping determine the demand for U.S. dollars in the foreign exchange market is

When we have a negative current account, we are

An official settlements account balance of - $5,000 means

Suppose that the price of an identical sport- utility vehicle is $32,000 in U.S. dollars in the United States and $32,000 in Canadian dollars in Canada. Suppose in addition that the exchange rate between Canada and the United States is one Canadian dollar equals $0.75 U.S. dollar. Does purchasing power parity hold for SUVs between the United States and Canada?

Given the U.S. price level P, the foreign country price level P*, and the nominal exchange rate E in foreign currency per U.S. dollar, the real exchange rate RER is given by

In the foreign exchange market, if the demand for dollars permanently decreases, the Fed can maintain the exchange rate at its old equilibrium level indefinitely by buying dollars.

An increase in the Japanese interest rate will the demand for dollars and lead the dollar to )

A rise in the exchange rate leads to a decrease in the quantity of dollars demanded.

-In the above figure, suppose the economy is initially at point A. People come to expect the future u.S. exchange rate to be lower. As a result, there is a change from point A to a point such as )

-In the figure above, the shift in the demand curve for U.S. dollars from D₀ to D₁ could occur when

In the short run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.

If the current account has a positive balance of $100 and the capital account has a negative balance of $90, there will be _ _ in official reserves of _ _.

Balance of payments accounts include

Suppose the Fed wants to fix the U.S. dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar, the Fed can

If there is an increase in the expected future U.S. exchange rate, there is

Suppose the exchange rate of the U.S. dollar was 1.50 British pounds = $1.00 (U.S.) on Wednesday, and on Monday the exchange rate was $.75 (U.S.) = 1.00 British pound. Which of the following best describes what happened between Wednesday and Monday?

The current account balance is defined as

If growth in the United States speeds up so that investors believe they can make a bigger profit from U.S. assets, the _ U.S. dollars will .

Suppose X - M = net exports; T - G = government sector surplus or deficit; and S - I = private sector surplus or deficit. Which of the following relationships is correct?

If the Japanese yen was 123 per dollar and now is 114 yen per dollar, it can be said that