Exam 37: Exchange Rates and the Macroeconomy

If the U.S.government runs a budget deficit (G - T), that deficit must be financed by an excess of

Economic theory shows that the current account deficit is always equal to the capital account surplus.This means that

An increase in the U.S.price level relative to the price level of other countries would

International capital flows tend to reduce the impact of fiscal policy.

Discuss the opposing points of view on U.S.trade deficit.

In an open economy, an increase in (G - T) will

An appreciation of the Japanese yen would shift the Japanese aggregate demand curve inward.

The U.S.trade deficit is made possible, in part, because of foreigners' demand for U.S.financial assets.

The major difference between a closed economy and an open economy is that a(n)

The accounting relationship between the budget deficit and the trade deficit may be expressed as ____.

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

An exchange rate depreciation acts to reduce inflation.

For a major country with extensive capital flows, what is the effect of a decrease in interest rates?

An increase in the price level in Japan relative to the price level in the United States would

Following the economic crisis in 1994-1995, the Mexican peso fell sharply in value.What will be the main economic effects in Mexico of such an exchange rate change?

The United States can reduce its trade deficit by limiting imports through tariffs.

The saving rate in the United States fell to nearly zero in the early 2000s.One of the contributing factors to this development was the

If European economies experience a strong economic recovery, U.S.net exports will

Since the U.S.economy expanded rapidly from 1992 to 2000, it must be true that

A rise in the domestic interest rate leads to capital outflows and makes the currency depreciate.