Exam 18: International Macroeconomics

A financial investor from Los Angeles purchases bonds issued by the government of Peru. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

An increase in the value of a currency that is set under a fixed exchange rate regime is a(n):

A reduction in the value of a currency that is determined under a floating exchange rate regime is a(n):

A reduction in the value of a fixed rate currency is called a devaluation.

A change in the U.S. balance of payments on financial account generates an equal and opposite reaction in the balance of payments on current account.

After a devaluation, all other things equal, a country's balance of payments on the current account will likely increase.

Britain has changed from a fixed exchange rate regime to a floating exchange rate regime.

Suppose that interest rates rise in the United States. We expect capital _____ to/from the United States and the U.S. dollar price of foreign currencies to _____, all other things equal.

Scenario: Gizmovia II The Republic of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current exchange rate for the gizmo is $0.75. If Gizmovia uses foreign exchange controls, it should require licenses to _____ gizmos and _____ dollars.

A rule governing policy for the exchange rate is: I. the terms of trade. II) an exchange rate regime.

The exchange rate ensures that the balance of payments really does balance.

If there is purchasing power parity between currencies, a Big Mac will be cheaper in countries whose currency has appreciated.

An argument in favor of Britain's adopting the euro was that using the same currency as many other European countries would make monetary policy more effective.

Which statement is TRUE?

In the early 2000s, Chinese exports led to a large surplus on its current account.

After a devaluation, all other things equal, a country's balance of payments on the current account will likely:

If the exchange rate is initially $1 = 12.95 pesos but changes to $1 = 15 pesos, then the dollar has _____ and the price in Mexico of a $10,000 U.S.-built Harley Davidson motorcycle has _____.

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. French exports to the United States will:

If the demand for pounds sterling in the United States rises, then the:

China's current account surplus and private capital inflows resulted in an equilibrium exchange rate below the target exchange rate.