Exam 9: The Exchange Rate and the Balance of Payments

If people expect the foreign exchange rate for dollars to rise in the future

U.S. official reserves are the

The main item in the current account balance is

If the current account balance is $30 billion, and the capital and financial account balance is $35 billion, then the official settlements account balance is ________ billion, and the official reserves ________.

An exchange rate is the price of one country's currency in terms of another country's currency.

Suppose the target exchange rate set by the Fed is 100 guilders per dollar. If the demand for dollars temporarily decreases, to maintain the target exchange rate, the Fed can

The balance of payments account which records foreign investment in the United States and U.S. investments abroad is the

Suppose the market for dollars is in equilibrium, then the expected future exchange rate rises. What effect does this change have on the current exchange rate?

Which of the following examples definitely illustrates a depreciation of the U.S. dollar?

Consider the market for euros. Suppose the exchange rate is ________ its equilibrium. This means that the quantity of euros ________ is greater than the quantity of euros ________ and the exchange rate will ________.

When a nation has no funds to finance economic development, how can it acquire the needed funds? Is the country a net lender or a net borrower?

The higher the dollar's exchange rate, the ________ the expected profit from holding dollars and so ________ dollars are supplied.

A small country is an international borrower and its domestic demand for loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international borrowing ________.

What happens in the foreign exchange market if the U.S. interest rate increases? What is the effect on the exchange rate?

If the prices in the United States rise faster than those in other countries,

The lower the exchange rate today, ceteris paribus, the

Suppose U.S. net exports are -$400 billion and the U.S. government sector surplus is $200 billion. Then in the private sector, saving minus investment equals

Give an example of currency depreciation and appreciation.

When the U.S. exchange rate rises, foreign goods become ________ and U.S. imports ________.

An increase in the interest rate in the United States compared to the interest rate in Great Britain will