Exam 19: Open-Economy Macroeconomics

Use the following to answer questions : Scenario: Gizmovia II The Republic of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current exchange rate for the gizmo is $0.75. -(Scenario: Gizmovia II) Look at the scenario Gizmovia II. If Gizmovia uses monetary policy to bring the exchange rate for the gizmo to $0.50, it should _____ interest rates, which will _____ capital outflows of gizmos.

Suppose that on January 1 the exchange rate was 15 Mexican pesos per U.S. dollar. On December 31 of that year, a person needed 11 pesos to buy a dollar. Over the course of that year, did the dollar appreciate or depreciate against the peso? Did the change in the exchange rate make U.S. goods and services more or less attractive to Mexican consumers? Explain.

If asset owners in Japan and the United States consider Japanese and U.S. assets as good substitutes for each other and if the U.S. interest rate is 5% while the Japanese interest rate is 2%:

A shift to the left of the demand for loanable funds could be caused by:

In the foreign exchange market, an increase in the rate of return available in the eurozone, all other things equal, will shift the _____ curve for the _____ to the _____, and the euro will _____.

Use the following to answer questions : Scenario: Gizmovia The Republic of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current exchange rate for the gizmo is $0.40. -(Scenario: Gizmovia) Look at the scenario Gizmovia. At the target rate of $0.50:

One of the advantages of adopting a fixed exchange rate system is that it:

When the dollar value of the Swiss franc was very high following the financial crisis in 2008:

A fixed exchange rate: I. makes monetary policy less effective for domestic stabilization. II. is more expensive to maintain than a fixed exchange rate. III. reduces uncertainty in international trade.

All other things unchanged, an increase in the value of the dollar against the euro _____ U.S. net exports and shifts the aggregate demand curve to the _____.

Since the adoption of the euro in 2001, monetary policy has become much more effective in individual European countries.

Between 1993 and 2013, the Mexican peso fell against the U.S. dollar by almost three-fourths of its original value. However, economists have concluded that this did not result in a corresponding fall in the price of Mexican products expressed in dollars. What explains this apparent paradox?

A current account surplus occurs when:

Use the following to answer questions : -(Table: Balance of Payment) Refer to the table Balance of Payments. The country's balance of payments on financial account is:

Suppose that the United States and Canada are the only trading partners in the world and the U.S. Congress passes more restrictive import policies. Assuming that the Canadian Parliament does not retaliate, what will happen to the U.S. balance of payments on the current account? All else equal, how will more restrictive import policies affect the U.S. balance of payments on the financial account? Explain the thinking behind your conclusions.

If the nominal exchange rate and the price level fall, then the real exchange rate will fall as well.

China's current account surplus and private capital inflows resulted in an equilibrium exchange rate below the target exchange rate.

If the price levels in two countries are equal, then the real exchange rate between their currencies equals the nominal exchange rate.

As the balance of payments in the financial account_____, the balance of payments on current account increases and the U.S. dollar _____.

A current account deficit is generally a result of: