Exam 9: The Exchange Rate and the Balance of Payments

In the foreign exchange market,a decrease in the supply of dollars leads to an appreciation of the U.S.dollar.

Suppose that U.S.inflation is 3 percent and Turkish inflation is 70 percent.The effect of this discrepancy on the foreign exchange market is that

Component Amount (billions of dollars) Government expenditure, G 700 Net taxes, T 600 Investment, I 350 Savings, S 500 -In the table above,what is the government's sector balance?

Investor Expected future value of a dollar (francs per dollar) Investor A 120 Investor B 100 Investor C 85 -Using the table above,if the current market value of the dollar is 70 francs,

Which of the following countries are net lenders? I. Japan II. United States

A country's balance of payments accounts record

-In the figure above,suppose the economy is initially at point B.Then the interest rate in Japan rises relative to the interest rate in the United States.This change ________ the supply of dollars and the market moves to a point such as ________.

An increase in the U.S.interest rate differential increases the demand for dollars.

Relative to the yen,from 2005-2007 the U.S.dollar

Other things remaining the same,if the U.S.interest rate differential increases,the demand curve for U.S.dollars shifts ________ and the supply curve of U.S.dollars shifts ________.

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

-The figure above shows the demand and supply of dollars in the foreign exchange market.The equilibrium in the market occurs at a price of ________ Brazilian reals per dollar and a quantity of ________ billion dollars.

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

When the U.S.exchange rate rises and the expected future exchange rate does not change,the expected profit from buying U.S.dollars today

If net exports increases,but neither government expenditure nor net taxes change,saving must increase.

Since the mid 1980s,the United States has been a net ________ and a ________ nation.

If foreign investment in the United States exceeds U.S.investment abroad,there is a ________; and when U.S.investment abroad exceeds foreign investment in the United States,there is ________.

The exchange rate is the

In 2007,Japan reported that its overseas assets totalled more than $4.6 trillion. This implies that Japan

In France,the price of a computer is 1,227.6 euros.In Japan,the price of the same computer is 137,920 yen.If a U.S.dollar can buy 1.023 euros or 119.93 yen,then purchasing power parity ________.