Exam 14: Exchange Rate Adjustments and the Balance-of-payments

The absorption approach to currency depreciation focuses on the

The extent to which a change in the exchange rate leads to changes in import and export prices is known as:

The lag that occurs between changes in relative prices and the quantities of goods traded is the

Suppose the U.S.price elasticity of demand for imports equals 1.2 and the foreign elasticity of demand for U.S.exports equals 1.5.According to the Marshall-Lerner condition,an appreciation of the dollar's exchange value would worsen the U.S.balance of trade.

Suppose the dollar appreciates 10 percent against the Swiss franc.According to the J-curve effect,the U.S.balance of trade will initially worsen,but then improve as time passes.

Suppose a country devalues its currency.If the country's demand for imports is ______,the price increase resulting from the devaluation results in a relatively small decrease in the volume of imports,causing to total import expenditures to increase.

According to the J-curve effect,currency depreciation:

According to the absorption approach,currency devaluation best improves a country's trade balance when its economy is at maximum capacity.

The shorter the currency pass-through period,the ____ required for currency depreciation to have the intended effect on the trade balance.

Concerning currency devaluation (depreciation),the elasticities approach and the absorption approach are theories that deal with

If a currency's exchange rate is undervalued,a government would likely initiate actions to devalue the currency.

When manufacturing computer software,suppose that Microsoft Inc.uses labor and materials whose costs are denominated in dollars and francs respectively.If the dollar's exchange value depreciates 10 percent against the franc,the franc-denominated cost of the firm's software falls by 10 percent.

Given favorable elasticity conditions,an appreciation of the yen results in

According to the absorption approach,currency devaluation (depreciation) best leads to an improvement in the balance of trade when a country

Assume that a country operates at less than full employment and has excess productive capacity.According to the absorption approach,the currency devaluation (depreciation) tends to

The purpose of currency revaluation is to cause an appreciation in a currency's exchange value.

The elasticity approach to currency depreciation emphasizes the income effects of depreciation.

Partial currency pass-through implies that if the dollar's exchange value appreciates by 10 percent,imports would become,say,6 percent more expensive to Americans while U.S.exports would become,say,8 percent cheaper to foreigners.

An appreciation of the U.S.dollar tends to:

Assume that Brazil has a constant money supply and that it devalues its currency.The monetary approach to devaluation reasons that one of the following tends to occur for Brazil: