Exam 18: International Macroeconomics

The nominal exchange rate is: I. the evaluation and ranking of different global stock exchanges. II) the price of a country's money in terms of another country's money.

If the euro depreciates, then a Chevrolet will be cheaper for Italians.

Floating exchange rates help insulate countries from recessions in other countries.

Foreign exchange reserves are stocks of foreign currencies that a government maintains to buy its currency in foreign exchange markets.

If a government fixes the exchange rate _____ the market equilibrium, there will be a shortage of the domestic currency and a tendency for the exchange rate (U.S. dollars per unit of the other currency) to _____.

If a country has a current account deficit, it must have a:

The Exchange Rate Mechanism established a target zone for European exchange rates during the late 1980s and 1990s.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows. At an interest rate of 4%, the shortage of loanable funds available to _____ borrowers will be satisfied by _____ lenders.

Scenario: Japan and the United States Suppose that the interest rate in the United States is 4%, in Japan it is 7%, and financial assets in the two countries are equal in risk. The implication is that:

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows. At an interest rate of 4%, the quantity of loanable funds demanded by U.S. borrowers is _____ the quantity of loanable funds supplied by U.S. lenders.

If a country fixes its exchange rate, it loses its ability to use monetary policy for macroeconomic stabilization.

All other things equal, a contractionary monetary policy in Canada will decrease Canadian interest rates and increase the demand for and decrease the supply of the Canadian dollar.

A devaluation of a currency tends to decrease the current account deficit.

An argument against Britain's adopting the euro was that using the euro would make monetary policy less effective.

If the price levels in two countries are equal, then the real exchange rate between their currencies equals the nominal exchange rate.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows. At an interest rate of 4%, the quantity of loanable funds supplied by British lenders is _____ the quantity of loanable funds demanded by British borrowers.

If the United States is in an inflationary gap, the appropriate policy is to _____ the money supply to _____ interest rates.

If Japanese buyers demand more U.S. dollars, then the dollar will _____, the yen will _____, the U.S. balance of payments on current account will _____, and the U.S. balance of payments on financial account will _____.

If a country's currency appreciates, all other things equal, its exports and imports will increase.

When the dollar appreciates, exports will _____ and imports will _____ .