Exam 9: The Exchange Rate and the Balance of Payments

Currently, the United States is both a net borrower and a debtor nation.

Suppose the Fed wants to fix the U.S. dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar, the Fed can

-The figure above illustrates the U.S. foreign exchange market. Illustrate how the exchange rate changes if the expected future exchange rate falls. Does the dollar appreciate or depreciate?

-The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the U.S. dollar ________ against the Canadian dollar and the Euro ________ against the U.S. dollar

-The data in the table above illustrates items from the U.S. balance of payments accounts. The data show that

The interest rate in Canada rises while the interest rate in the United States does not change. The

If growth in the United States speeds up so that investors believe they can make a bigger profit from U.S. assets, the ________ U.S. dollars will ________.

Define net borrower, net lender, creditor nation, and debtor nation. Discuss the difference between a net borrower and a debtor nation.

If the European Central Bank increases European interest rates

-Using the data in the above table, suppose imports equal $250 billion and investment equals $1,000 billion. Hence government expenditure equals

If the world real interest rate falls, then a country that is an international lender

If the target exchange rate is 100 yen per dollar and the current exchange rate is 90 yen per dollar, the Fed will

Which of the following are included in the U.S. current account balance? I. exports to Japan II. interest payments made to Canada III. transfer payments made to Israel

If the current account balance is $235 billion and U.S. official reserves increased by $35 billion, what is the official settlements account balance and the capital account balance?

The demand curve for U.S. dollars slopes downward because as the dollar ________ U.S. goods become ________ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases.

Suppose the U.S. interest rate is 6 percent and the world interest rate is 5 percent. The U.S. interest rate differential is

-In the figure above, the shift in the supply curve for U.S. dollars from S₀ to S₁ could occur when

All of the following are a current account transaction EXCEPT

How does the Fed intervene in the foreign exchange market and what the effects are of the Fed's actions?

-In the figure above, the shift in the supply curve for U.S. dollars from S₀ to S₁ could occur when