Exam 9: The Exchange Rate and the Balance of Payments

Suppose a Japanese bank offers a 4 percent interest rate and U.S. banks offer a 2 percent interest rate. People must expect the yen to

A net borrower is a country that ________, while a net lender is a country that ________.

X is exports, M is imports, T is net taxes, G is government expenditure, C is consumption expenditure, S is saving, and I is investment. The government sector balance is equal to

When the U.S. exchange rate rises, foreign goods become ________ and U.S. imports ________.

-The figure above shows the demand and supply of dollars in the foreign exchange market. At a price of 2.40 Brazilian reals per dollar

The current account is

A net exports deficit or surplus equals

What happens in the foreign exchange market if the U.S. interest rate increases? What is the effect on the exchange rate?

What is the relationship between net exports, the government sector surplus or deficit, and the private sector surplus or deficit?

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

Why do people and firms in the United States supply dollars to the foreign exchange market?

Suppose that a dollar buys 120 yen. If a VCR sells for 18,600 yen in Japan, the price of the VCR in dollars is ________.

What balance of payment account records foreign investment between countries?

If the current account has a positive balance of $100 and the capital and financial account has a negative balance of $90, there will be ________ in official reserves of ________.

If the U.S. interest rate rises while interest rates in the rest of the world do not change, the higher U.S. interest rate

A decrease in the expected future exchange rate ________ the demand for U.S. dollars and shifts the demand curve for U.S. dollars ________.

Interest rates in the United States rise relative to interest rates in other countries. As a result, in the foreign exchange market

Suppose a British bank offers a 3 percent interest rate while a U.S. bank offers a 7 percent interest rate. People must expect the U.S. dollar will

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?

In 2007, the U.S. sold $73 million of cigarettes to Iran. Iran paid for these cigarettes using