Exam 9: The Exchange Rate and the Balance of Payments

Exports of U.S. goods create a ________ U.S. dollars and create a ________ foreign currencies.

The private sector surplus or deficit equals

The dollar is regarded as the "safe haven" currency; investors flock to it when they are worried about the outlook for the global economy. Fears were at their greatest in late 2008 and early 2009 after the collapse of the Lehman Brothers investment bank in September 2008. If investors flocked to the dollar

Suppose that the U.S. interest rate is 5 percent and the Turkish interest rate is 50 percent. The effect of this difference in the foreign exchange market is that

-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.

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

-In the figure above, an increase in the U.S. interest rate relative to that in Canada shifts the demand curve for U.S. dollars ________ and shifts the supply curve of U.S. dollars ________.

"Currency appreciation" means the price of the currency is decreasing.

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

The Federal Reserve can influence the exchange rate by

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 above table, saving must be

Suppose that the price of a Big Mac is a good approximation of the price level in the country. A Big Mac costs £2 in London and $3 in New York. a)If purchasing power parity holds, what is the exchange rate between the U.S. dollar and the British pound? b)If the current exchange rate is $1.6 per pound, what is the dollar price of a Big Mac in London? What do you predict will happen to the exchange rate? Explain. c)The exchange rate between the U.S. dollar and the Russian ruble is 30 rubles per dollar. If purchasing power parity holds, what is the price of a Big Mac in Moscow?

When the value of one currency falls relative to another currency, the exchange rate for the first currency has

In the foreign exchange market, the higher the dollar's exchange rate, the

Which of the following transactions is NOT recorded in the capital and financial account?

The higher the exchange rate today, the

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 above table gives data for the nation of Sueland. What is the government sector balance?

Suppose this year Angola borrows $100 million from foreign countries, while it lends $15 million to other countries. Angola definitely is a