Exam 9: The Exchange Rate and the Balance of Payments

Suppose the current exchange rate between the Chinese yuan and the United States dollar is 7 yuan per dollar. If the Fed sought to drive up the exchange rate to 8 yuan per dollar then it would

If the Federal Reserve increases U.S. interest rates, ceteris paribus

A country's balance of payments accounts include all of the following EXCEPT the

The largest part of the U.S. current account consists of

Suppose that the price of a Big Mac is a good approximation of the price level in the country. A Big Mac costs £2 in London and $3 in New York. a) If purchasing power parity holds, what is the exchange rate between the U.S. dollar and the British pound? b) If the current exchange rate is $1.6 per pound, what is the dollar price of a Big Mac in London? What do you predict will happen to the exchange rate? Explain. c) The exchange rate between the U.S. dollar and the Russian ruble is 30 rubles per dollar. If purchasing power parity holds, what is the price of a Big Mac in Moscow?

-In the figure above, the shift in the supply curve for U.S. dollars from S₀ to S₂ could occur when

In the United States -since 1981- which two of the following have almost always moved in the same direction?

In the foreign exchange market, how does a fall in the U.S. interest rate affect the supply of dollars?

In October 2008, Iceland's central bank increased its lending rate to 18% in an "effort to prop up the country's frozen current and markets." (www.nytimes.com, October, 29, 2008) As a result, the ________ curve for Icelandic krona shifted ________, holding all else the same.