Exam 9: The Exchange Rate and the Balance of Payments

When there is a current account deficit and the official settlements account equals 0, then

Item Millions of crumbs Imports of goods and services 2,000 Exp orts of goods and services 3,000 Borrowing from the rest of the world 1,500 Net investment income p aid to foreigners 60 Net transfers paid to foreigners 60 -The table above shows the transactions made during 2011 by the citizens of Biscuit, whose currency is the crumb. During 2011, the official reserves increased by 380 million crumbs. How many million crumbs did Biscuit lend to the rest of the world in 2011?

A decrease in the demand for U.S. exports__________the demand for U.S. dollars and shifts the demand curve for U.S. dollars__________ .

The higher the dollarʹs exchange rate, the _________the expected profit from holding_________ dollars and so Dollars are supplied.

All of the following statements are correct EXCEPT:

If the Fed raises the interest rate, in the foreign exchange market the demand for the U.S. dollar increases.

A German publishing company buys an American publishing company based in New York. In the u.S. balance of payments accounts, this transaction directly appears in

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?

Suppose a Japanese bank offers a 4 percent interest rate and U.S. banks offer a 2 percent interest rate. People must expect the yen to

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, the demand curve for U.S. dollars __________and the demand curve for South Korean won __________.

Suppose the exchange rate for the U.S. dollar rises. This could be caused by

In late 2010 the National Bank of Australia offered a 4 percent interest rate on a savings account while Bank of America offered 2 percent. This difference means that

The current account records foreign investment in the United States minus U.S. investment abroad.

Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus, due to increased demand for world travel. As a result, the

The current account balance is defined as

The current account records all transactions below EXCEPT for

An increase in the Japanese interest rate will__________ the supply of dollars and lead the dollar to__________

In October 2008, Icelandʹs central bank increased its lending rate to 18% in an ʺeffort to prop up the countryʹs frozen current and markets ʺ www.nytimes.com, October, 29, 2008) As a result, the __________ curve for Icelandic krona shifted _________, holding all else the same.

The supply curve of U.S. dollars shifts leftward. This could have been influenced by .

Last year the exchange rate between U.S. dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here, the dollar _________against the peso,_________ and the peso against the dollar