Exam 22: International Trade

Suppose a Mexican consumer wants to buy an American television for $500 and an American wants to buy a Mexican raincoat for 700 pesos.If the exchange rate is $0.10 = 1 peso,then the price of the television in pesos will be __________ and the price of the raincoat in dollars will be __________.

If real interest rates in Japan fall relative to real interest rates in the United States,the yen will likely __________ in terms of the dollar and the dollar will likely __________ in terms of the yen.

There is a flexible exchange rate system and only two countries in the world,the United States and Mexico.The real interest rate in the United States rises relative to the real interest rate in Mexico.It follows that

Economist Charles Kindleberger (a proponent of fixed exchange rates mentioned in the text)would agree with which of the following statements?

Research by economists Bloom,Draca,and Van Reenen revealed that imports from China were associated with not only lower consumer goods prices,but also a ______________ cost of inputs for domestic firms,a(n)______________ in the variety of products those domestic firms sold,and a(n)_______________ in U.S.productivity.

When the official dollar price of a foreign currency is lowered,the dollar is being

The concept of an optimal currency area arose from the debate over whether fixed or flexible exchange rates are better.

In the long run,the purchasing power parity theory predicts exchange rates accurately,particularly when there is a large difference in inflation rates across countries.

As the dollar price of a foreign currency (for example,dollars per yen)increases,__________ dollars will be demanded by foreigners,U.S.goods will be __________ expensive for foreigners,__________ U.S.goods will be purchased by foreigners,and __________ foreign currency will be supplied to the foreign exchange market.

Suppose the current exchange rate between the U.S.dollar and the Mexican peso is $0.12 = 1 peso.Furthermore,suppose the price level in Mexico rises 25 percent while the U.S.price level remains constant.According to the purchasing power parity theory,what will be the equilibrium exchange rate?

Americans buying Japanese cars create a

Suppose that an increase in a nation's income causes the nation's residents to buy more domestic and foreign goods.Given this,if U.S.residents experience an increase in income,but Mexican residents do not,it is likely that,ceteris paribus,

If the U.S.dollar appreciates in the foreign exchange market,U.S.exports will be __________ and U.S.imports will be __________.

Suppose that the exchange rate between the U.S.dollar and the Mexican peso starts out at $0.11 per peso.If the exchange rate then changes to $0.13 per peso,there will be a(n)__________ in the quantity demanded of dollars by Mexicans,and therefore there will be a(n)__________ in the quantity supplied of pesos to the foreign exchange market.

Proponents of the fixed exchange rate system argue that

One example of an optimal currency area is the states within the United States.

If Americans demand goods produced in Mexico,it leads to a demand for Mexican pesos and a supply of U.S.dollars on the foreign exchange market.

Suppose that prices in the United States rise relative to prices in Japan.We expect that

When the equilibrium dollar price of a foreign currency decreases due to changes in demand for or supply of the foreign currency,the foreign currency

If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.007 = 1 yen,but currently the exchange rate is $0.009 = 1 yen,then with flexible exchange rates the dollar price of a yen will __________,and the yen will __________.