Exam 9: The Exchange Rate and the Balance of Payments

If imports are $1,200 billion and exports are $1,300 billion, while net interest income and net transfers are zero, what is the current account balance?

Today, the United States is a I. net borrower II. net lender III. debtor nation IV. creditor nation

"If the official settlements balance is zero, a current account surplus must equal the capital account deficit." Is the previous statement correct or incorrect? Briefly explain your answer.

Other things remaining the same, if the U.S. interest rate differential increases, in the foreign exchange market

-In the figure above, the equilibrium exchange rate is: $1 U.S. equals

U.S. residents come to believe that the dollar will appreciate in the future, that is, the exchange rate in the future will be higher than the current exchange rate. As a result,

When the U.S. exchange rate rises, foreign goods become and U.S. imports .

Interest rate parity implies

-In the figure above, the shift in the supply curve for U.S. dollars from S₀ to S₁ could occur when

Over its history, Brazil has borrowed more from the rest of the world than it has loaned to the rest of the world. Brazil

A country that during its entire history has borrowed more from the rest of the world than it has lent to it is a , and a country that during its entire history has invested more in the rest of the world than other countries have invested in it is a _.

Suppose the target exchange rate set by the Fed is 150 yen per dollar. If the demand for dollars permanently decreases the Fed

U.S. data show that and _ tend to move in opposite directions.

The current account balance is equal to

In June 2008, the dollar bought 1.6 Brazilian reals and in October, the dollar bought 2.4 reals. This resulted in a

Hyundai is a large South Korean company that produces finished steel products. Hyundai plans to buy raw steel from U.S. Steel. As a result,

According to purchasing power parity, if the exchange rate between the dollar and the Brazilian real is 2 reals per dollar, and a Big Mac costs $3.10 in the U.S., then the Brazilian price will be

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

-The data in the table above are the U.S. balance of payments. The sum of the current account plus capital account plus official settlements account is equal to

Other things remaining the same, the higher the exchange rate, the larger is the expected profit from buying dollars.