Exam 9: The Exchange Rate and the Balance of Payments

What are the three balance of payments accounts? Briefly describe them. What is the relationship among the three?

With everything else the same, in the foreign exchange market the

Suppose your firm wants to import sugarcane from Brazil. The exchange rate is 3 Brazilian reals per U.S. dollar and sugarcane costs 36 reals per ton. How much is a ton of sugarcane in U.S. dollars?

-In the figure above, the shift in the demand curve for U.S. dollars from D₀ to D₂ could occur when

Item Amount (billions of dollars) Imports of goods and services 1,400 Exports of goods and services 1,600 Net interest 0 Net transfers 0 Foreign investment in the United States 480 US.investment abroad 700 -The above gives some of the balance of payments accounts of the United States in 2020. a) What is the current account balance? b) What is the capital account balance? c) What is the official settlements account balance?

To pay for a current account deficit, a country can

If the price level rises in the United States but not in foreign nations and the current exchange rate does not change, the expected future exchange rate

An increase in foreign demand for U.S. exports will __________the demand for dollars and lead the dollar to __________.

What happens in the foreign exchange market if the U.S. interest rate increases? What is the effect on the exchange rate?

Adjusted for risk, interest rate parity

The change in U.S. official reserves is equal to

Item Billions of dollars Exports of goods 1000 Imports of goods -665 Exp orts of services 410 Imports of services -590 Net interest income 0 Net transfers -15 U S . investment abroad -600 Foreign investment in 400 the United States Official settlements account 60 -The data in the table above are the U.S. balance of payments. The capital and financial account balance is

The exchange rate can be influenced by a nationʹs central bank.

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

Suppose the peso-dollar foreign exchange rate changes from 50 pesos per dollar to 30 pesos per dollar. Then the peso has _________against the dollar and the dollar has _________against the peso.

Item Billions of dollars Exp orts of goods and services, X Imports of goods and services, M 1,000 Net taxes, T Government exp enditure, G 1,300 Saving, S Investment, I 650 -Using the data in the above table, if the government sector runs a deficit of $250 billion and net exports equal -$500 billion, then saving must equal

-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?

Item Billions of dollars Exports 234 Imports 277 Government expenditure 887 Net taxes 855 Investment 760 Saving 749 -The above table gives data for the nation of Sueland. What is the value of net exports?

If net exports increases, but neither government expenditure nor net taxes change, saving must increase.

In the foreign exchange market, how does each of the following influences affect the demand for dollars and the demand curve for dollars? a) an increase in the exchange rate. b) an increase in the U.S. interest rate. c) a fall in the expected future exchange rate.