Exam 19: Open-Economy Macroeconomics

If the merchandise trade balance is -$15, net international transfer payments and net international factor income are $4, the balance of payments on goods and services is -$25, and the balance of payments on the financial account is $18, then the statistical discrepancy in the financial account is:

Explain how floating exchange rates in the United States can help insulate the U.S. economy from a recession in Europe.

If the current account is in surplus, the financial account must also be in surplus.

An increase in the value of a fixed rate currency is called an appreciation.

If the U.S. dollar appreciates relative to currencies in other countries, then U.S. imports will _____ and exports will _____.

In the early 2000s, Chinese exports led to a large surplus on its current account.

If the target exchange rate of a fixed currency is above the equilibrium exchange rate, to reach the target rate, the government should encourage capital inflows.

To determine the real exchange rate, one needs to know:

If the government wants to decrease the value of its currency in foreign exchange markets, it can sell its domestic currency in the foreign exchange market.

After a devaluation, all other things equal, exports will likely _____ and imports will likely _____ .

A depreciation of a currency below the exchange rate fixed by its government can be countered by all of the following measures EXCEPT by:

When the United States gives foreign aid to developing nations in Africa, the _____ account is affected.

When the value of the euro changes from $1.30 to $1.20, it follows that:

Which of the following would demand dollars in the foreign exchange market? I. Americans who want to buy U.S. goods, services, and assets II. Americans who want to buy European goods, services, and assets III. Europeans who want to buy U.S. goods, services, and assets

A country has a capital account deficit if the balance on the:

In the 1970s most European countries were unhappy with floating exchange rates because they made each country's domestic monetary policy ineffective.

If the exchange rate is $1.50 per euro, the U.S. price level is 180, and the eurozone price level is 120, then the real exchange rate per euro is:

A devaluation of a currency tends to decrease the current account deficit.

Demand for pounds sterling in the foreign exchange market might come from people in Britain who want to buy U.S. goods, services, and assets.

Which of the following would be included in the U.S. current account?