Exam 19: Open-Economy Macroeconomics

Donald owns several hotels in U.S. tourism destinations. Much of Donald's hotel revenue comes from Europeans. Suppose the U.S. dollar depreciates against the euro. Explain how this will affect Donald's hotel business.

If the exchange rate is ¥200 per U.S. dollar, the U.S. price level is 120, and the Japanese price level is 600, then the real exchange rate is:

A depreciated dollar will cause aggregate demand to:

The Venezuelan bolivar trades at a fixed exchange rate. If Venezuela uses monetary policy to change the exchange rate of the bolivar from $0.16 to $0.20, the bolivar has:

Foreign exchange controls, unlike tariffs and quotas, do not distort incentives for trade between countries.

Foreign currencies are traded in the _____ market.

A country has a floating exchange rate if the government lets the exchange rate go wherever the market may take it.

If the dollar value of the pound falls, then the dollar has depreciated.

An advantage to floating exchange rates is that they help:

All countries must have either a fixed or floating exchange rate, since there are no possible compromises between the two policies.

A country's balance of payments accounts:

Use the following to answer questions : Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. -(Scenario: Exchange Rates) Look at the scenario Exchange Rates. In Germany, exports will _____ and imports will _____.

If a country fixes its exchange rate, it loses its ability to use monetary policy for macroeconomic stabilization.

If the target exchange rate of a fixed currency is below the equilibrium exchange rate, to reach the target rate, the government should limit the ability of foreigners to buy its currency.

All else equal, if the Federal Reserve decreases the money supply, interest rates will _____ and the dollar will _____ against other currencies.

A country has a financial account surplus if the balance on the:

If the United States exports $100 billion of goods and services and imports $150 billion of goods and services and there is no other factor income or transfers, the balance on the current account is:

Use the following to answer questions: Figure: International Capital Flows -(Figure: International Capital Flows) Look at the figure International Capital Flows. At an interest rate of 4%, the quantity of loanable funds demanded by British borrowers is _____ the quantity of loanable funds supplied by British lenders.

An appreciated dollar will cause aggregate demand to:

If the target exchange rate of a fixed currency is above the equilibrium exchange rate, to reach the target rate, the government should raise interest rates.