Exam 18: International Macroeconomics

A floating exchange rate: I. leaves monetary policy available for domestic stabilization. II) is less expensive to maintain than a fixed exchange rate. III) adds uncertainty to international trade.

A revaluation will make exports _____expensive and imports _____ expensive.

U.S. retailers import toys from China. In the U.S. balance of payments account, this transaction is entered as a payment _____ foreigners in the _____ account.

According to the principle of purchasing power parity, the 2001 devaluation of the Argentine peso:

A revaluation can help reduce _____ of domestic currency. I. shortages II) surpluses

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

A floating exchange rate:

If the U.S. dollar appreciates relative to currencies in other countries, then U.S. imports will _____ and exports will _____.

An increase in the value of a floating currency is called a revaluation.

Suppose that a country has floated its currency and the central bank sets an expansionary monetary policy. Which outcome is likely to occur?

A devaluation can help reduce a(n) _____ gap. I. inflationary II) deflationary

If the U.S. dollar depreciates, other things being equal:

The 2001 devaluation of the Argentine peso did NOT:

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

Suppose that the U.S. dollar depreciates nominally against the Mexican peso by 5%. The price level in the United States increases by 7%, but Mexico's price level does not change. From this we can conclude that:

Suppose that the United States and European Union are the only trading partners in the world. If the United States lowers import restrictions from the European Union, we would expect the:

Toyota's factory in San Antonio is an example of direct foreign investment.

If the Chinese government wants to keep the real and nominal exchange rates between the yuan and the U.S. dollar fixed at 8 yuan per dollar without government intervention in the foreign exchange market, the _____ rate in China must be _____ that in the United States.

A fixed exchange rate means that the government keeps the exchange rate against some other currency at or near a particular target.

If the exchange rate is $1 = 12.95 Mexican pesos, then the price of a $10,000 Harley Davidson motorcycle is _____ pesos in Mexico.