Exam 19: Open-Economy Macroeconomics

If there is purchasing power parity between currencies, a Big Mac will be cheaper in countries whose currency has appreciated.

If the U.S. dollar depreciates, other things being equal:

A _____ balance on the financial account means a _____.

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 foreign exchange controls, it should require licenses to _____ gizmos and _____ dollars.

Use the following to answer questions: Table: International Transactions -(Table: International Transactions) Look at the table International Transactions. The balance of payments on goods and services is:

If foreign countries are increasing their demand for U.S. financial assets, then we can expect the U.S. dollar to _____ and the current account balance to _____, all other things equal.

A Japanese banker buys some newly issued U.S. Treasury bonds. In the U.S. balance of payments account, this transaction is entered as a payment _____ foreigners in the _____ account.

A floating exchange rate: I. leaves monetary policy available for domestic stabilization. II. is less expensive to maintain than a fixed exchange rate. III. adds uncertainty to international trade.

After a hurricane devastates New Orleans, a Canadian charity sends $1 million to the United States to help the survivors rebuild their homes. In the U.S. balance of payments, this transaction causes the balance on the _____ account to _____.

A revaluation can help reduce shortages of domestic currency.

If a government fixes the exchange rate above the market equilibrium rate, there will be a surplus of its currency.

Interest rates between two countries tend to converge if:

If the U.S. dollar appreciates, we expect all of the following EXCEPT that:

If the exchange rate is 8 yuan per U.S. dollar, the U.S. price index is 145, and the Chinese price index is 206, the real exchange rate is _____ yuan.

A statement of spending that flows into and out of the country for purchases of assets during a particular period is the nation's:

If a country revalues its currency, it increases its aggregate demand.

Countries A and B are important trading partners. Country A is in a recession. Country B will be better insulated from the recession originating in country A if country _____ has a _____ exchange rate system.

Fixed exchange rates lead to more stable conditions for international trade.

If the government wants to increase the value of its currency in foreign exchange markets, it can use expansionary monetary policy.

Suppose interest rates rise in the United States. We expect capital _____ to (from) the United States and the U.S. dollar price of foreign currencies to _____, all other things equal.