Exam 19: The World of International Finance

All else equal, what will happen to the real exchange rate in the United States under each of the following circumstances? (a) the nominal exchange rate for the U.S. dollar depreciates (b) domestic prices in the U.S. increase (c) prices in the rest of the world rise

If a basket of goods costs 2 dollars in the United States and 10 euros in France, the theory of purchasing power parity states that the nominal exchange rate should be 5 euros per dollar.

The sum of the current account + the capital account + the financial account equals:

Recall Application 1, "The Chinese Yuan and Big Macs," to answer the following questions: -The real exchange rate is the rate at which a person can trade the currency of one country for goods and services in another country.

Which of the following is not included in the current account?

Recall Application 1, "The Chinese Yuan and Big Macs," to answer the following questions: -According to the application, the Big Mac "exchange rate" is based on which economic theory?

Explain the law of one price.

The Mexican financial crisis of 1994 was due to international investors' loss of confidence in the country.

When an American buys a factory in China, the transaction is registered a positive in the U.S. financial account.

A reduction in the British interest rate relative to the U.S. interest rate will cause a(n):

Under a flexible exchange rate system, the exchange rate between two currencies is determined by:

The net international investment position of the U.S. increases when Americans hold more assets issued by foreign countries.

Interest rates decrease in the United States. This will cause a(n):

If the net international investment position of the U.S. equals $100 billion, this means Americans hold $100 billion worth of foreign issued assets.

The rise in value of the euro relative to the U.S. dollar is a(n):

The agreements that were reached at the Bretton Woods conference in 1944 established a system:

In 2006, the U.S. net international investment position was negative $2.5 trillion. This means that the amount of:

If U.S. interest rates fall relative to British interest rates:

If the U.S. sends food aid to Zimbabwe to help the thousands who are dying from hunger, then the value of the aid is included in the _______ component of _______.

A U.S. firm builds a factory in South Africa. This will be entered as a: