Exam 16: International Trade in Goods and Assets

According to purchasing power parity, the relationship among the domestic price $( P )$ , the foreign price $\left( P ^ { * } \right)$ , and the nominal exchange rate $( e )$ , can be written as

Determine the impact of an increase in total factor productivity on domestic aggregate output, absorption, the current account surplus, the nominal exchange rate, and the price level. Assume a flexible exchange rate and flexible prices.

Under a hard peg

A capital outflow occurs when

In the monetary small open-economy model, a fixed exchange rate insulates the domestic price level from

Under a flexible exchange rate, an increase in the domestic money supply leads to

In an open economy, the law of one price implies that

An agreement among countries to adopt a common currency is called a

In the monetary small open-economy model with a flexible exchange rate, an increase in the domestic money supply increases

If a country's central bank seeks to stabilize the price level and if nominal shocks from abroad are important, then

In the monetary small open-economy model with a flexible exchange rate, an increase in the world real interest rate

If a country's central bank seeks to stabilize the price level and if real shocks from abroad are important, then

In the European Monetary Union, the supply of Euros

Purchasing power parity holds if

In the monetary small open-economy model with a fixed exchange rate, the domestic

Capital controls refer to

In the monetary small open-economy model, a flexible exchange rate insulates the domestic price level from

In the monetary small open-economy model with a fixed exchange rate, an increase in the foreign price level

In the monetary small open-economy model with a flexible exchange rate, an increase in the world real interest rate

For a country with a fixed exchange rate, foreign exchange reserves are