Exam 9: The Exchange Rate and the Balance of Payments

A country's balance of payments accounts record

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

When there is a current account deficit and the official settlements account equals 0, then

Suppose the current account of a country is in balance and the official settlements account equals 0. A new transaction occurs so that the current account is now in surplus, but the official settlements account does not change. From this we know that

During most of the 1980s, 1990s, and 2000s the U.S. has had a ________ current account balance and a ________ capital and financial account balance.

The country of Pimm exports $500 billion worth of goods and services and imports $400 billion worth of goods and services. Net interest income paid abroad is $50 billion and net transfers are $0. The current account balance is ________.

In the short run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.

A small country is an international borrower if its real interest rate without foreign borrowing is ________ the world real interest rate.

China has used a fixed yuan exchange rate and a crawling peg exchange rate. In both cases, China pegs its currency to the

The current account balance is defined as

Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The effect of this difference in the foreign exchange market is that

Suppose that $1 U.S. costs $1.50 Canadian. If in St. Louis a CD costs $10 U.S. and in Montreal it costs $15 Canadian, then ________.

Which of the following examples definitely illustrates a depreciation of the U.S. dollar?

The change in U.S. official reserves is equal to

Which of the following exchange rate policies uses a target exchange rate, but allows the target to change?

If in Chicago the interest rate is 5 percent a year and in Vancouver it is 4 percent a year, ________.

The Fed in the U.S.

When we export goods to foreign countries, we

"Although the United States is running a large current account deficit, it is still ranked as a major international net lender." Is the previous statement correct or incorrect? Briefly explain your answer.

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