Exam 18: International Macroeconomics

If a government fixes the exchange rate below the market equilibrium rate, there will be a surplus of its currency.

As a result of expansionary monetary policy, lower U.S. interest rates will result in a(n) _____ in the demand for dollars and a(n) _____ in the supply of dollars.

Foreign exchange controls, unlike tariffs and quotas, do not distort incentives for trade between countries.

When the United States gives foreign aid to developing nations in Africa, the _____ account is affected.

A reduction in the interest rate has _____ impact on aggregate demand with _____ exchange rates than with _____ exchange rates.

A country has a capital account deficit if the balance on the:

The difference between a fixed and a floating exchange rate regime is that with a _____ rate system, the _____, whereas with a _____ rate system it does not.

Scenario: Purchasing Power Parity A car costs $30,000 in the United States and the exchange rate is $1 = £0.50. The same car costs £12,000 in Britain. To have purchasing power parity, the pound must:

Use the following to answer questions: -(Table: International Transactions) Refer to Table: International Transactions. The balance on current account is:

Which method can be used to maintain a fixed exchange rate? I. exchange market intervention II) monetary policy III) foreign exchange controls

An argument in favor of Britain's adopting the euro was that using the same currency as many other European countries would expand trade and increase productivity.

A fixed rate system eliminates uncertainty about the future value of a currency.

If the exchange rate is $1.50 per euro, the U.S. price level is 180, and the eurozone price level is 120, then the real exchange rate per euro is:

Which of the following would be included in the U.S. current account?

Which statement regarding exchange rate intervention is FALSE?

A fixed exchange rate means that supply and demand of the currency determine its exchange rate.

Foreign exchange controls are:

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. As a result:

Britain, Sweden, and Switzerland chose not to adopt the euro in 1999.

Real exchange rates are those that are recognized by the International Monetary Fund.