Exam 19: Open-Economy Macroeconomics

Use the following to answer questions : Scenario: Exchange Rate between the United States and India Suppose that initially the nominal exchange rate was 40 rupees per dollar but it is now 50 rupees per dollar. -(Scenario: Exchange Rate between the United States and India) Look at the scenario Exchange Rate between the United States and India. If the nominal exchange rate is 50 rupees per dollar and the inflation rate in India is 25%, while the aggregate price level has remained unchanged in the United States, the real exchange rate between the U.S. dollar and the Indian rupee:

Use the following to answer questions : Scenario: Purchasing Power Parity A car costs $30,000 in the United States and the exchange rate is $1 = £0.50. The same car costs £12,000 in Britain. -(Scenario: Purchasing Power Parity) Look at the scenario Purchasing Power Parity. To have purchasing power parity, the pound must:

All other things equal, a contractionary monetary policy in Canada will decrease Canadian interest rates and increase the demand for and decrease the supply of the Canadian dollar.

The euro was devised in 1944.

Fixed exchange rates are set by the market.

Licensing systems that limit the right of individuals to buy foreign currency are: I. floating exchange rate regimes. II. foreign exchange controls. III. exchange market interventions.

The Bretton Woods monetary system:

Use the following to answer questions : Figure: Change in the Demand for U.S. Dollars -(Figure: Change in the Demand for U.S. Dollars) Look at the figure Change in the Demand for U.S. Dollars. A movement from E₂ to E₁ in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.

Consider the following transactions. How would they be entered in the U.S. balance of payments accounts? a. A U.S. citizen purchases a shirt produced in Mexico. b. A bank in Mexico City purchases a U.S. Treasury bond. c. A U.S. company buys an office building in Mexico City.

The difference between a country's balance of payments on goods and services and the merchandise trade balance is that:

Money flows into the United States from other countries as a direct result of:

If a country's currency appreciates, all other things equal, exports _____ and imports _____ .

The nominal exchange rate is: I. the evaluation and ranking of different global stock exchanges. II. the price of a country's money in terms of another country's money.

If a country has a current account deficit, it must have a:

When the dollar depreciates, exports _____ and imports _____ .

If the government wants to decrease the value of its currency in foreign exchange markets, it can limit the ability of foreigners to buy its currency.

When the interest rate in the U.S. increases as a result of contractionary monetary policy, investment spending _____ and consumption _____ .

A hamburger costs $8 in the United States and ¥960 in Japan. The nominal exchange rate is ¥110 per dollar. The inflation rates in the United States and in Japan are 2% and 4%, respectively. The purchasing power parity is _____ per dollar.

The Bretton Woods agreement called for a flexible exchange rate system.

Use the following to answer questions: Table: International Transactions -(Table: International Transactions) Look at the table International Transactions. What additional capital inflows are needed to equilibrate the balance of payments?