Exam 9: The Exchange Rate and the Balance of Payments

Other things remaining the same,the ________ the exchange rate for dollars,the greater the ________ in the foreign exchange market.

Other things remaining the same,the higher the current exchange rate,the larger is the expected profit from buying dollars.

The government sector balance is equal to ________.

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?

If the exchange rate between the dollar and Japanese yen is below the equilibrium exchange rate,there will be a ________ of dollars,and the exchange rate will ________.

In the foreign exchange market,what factor leads to a movement along the demand curve for dollars?

A rise in the exchange rate leads to a decrease in the quantity of dollars demanded.

If the U.S.government increased its holdings of British pounds,definitely

If the Fed raises the interest rate,in the foreign exchange market the demand for the U.S.dollar increases.

If the interest rate in the United States increases,then in the foreign exchange market the

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

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

Given the U.S.price level P,the foreign country price level P*,and the nominal exchange rate E in foreign currency per U.S.dollar,the real exchange rate RER is given by

An increase in foreign demand for U.S.exports will ________ the demand for dollars and lead the dollar to ________.

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,there was ________,holding all else the same.

A country's balance of payment accounts include its government budget deficit or surplus.

How do the capital account and the current account differ?

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

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?

The ________ the exchange rate,the ________ are foreign-produced goods and hence the smaller the quantity of dollars supplied.