Exam 19: Open-Economy Macroeconomics

An exchange rate regime is a rule governing policy for the exchange rate.

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. If Gizmovia uses exchange market intervention to increase the value of its currency to $0.50, it should _____ gizmos and _____ dollars in the foreign exchange market.

If a country wishes to raise the exchange rate above its equilibrium value in the foreign exchange market, it will notice:

The primary economic disadvantage of adopting the euro for Britain is:

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 flow of capital from Europe to the United States would cause a movement in this foreign exchange market that is best represented by the shift from:

Suppose that the United States and Canada are the only trading partners in the world. What will happen to the value of the U.S. dollar if the U.S. Congress passes more restrictive import policies? Explain.

With a fixed exchange rate regime, monetary policy is:

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

A reduction in the value of a currency that is set under a fixed exchange rate regime is a(n):

Suppose the yen falls from ¥800 to ¥1,200 to the dollar and the price level in Japan increases by 50% but there is no change in the price level in the United States. Which of the following is TRUE?

A system in which exchange rates are set by government policy is a ____ system.

When purchasing power parity is lower than the nominal exchange rate, over time one can expect:

The real exchange rate between the U.S. dollar and the Indian rupee is the:

All other things equal, a contractionary monetary policy will cause the domestic currency to appreciate.

In countries with rapidly growing economies, like China and India, the demand for loanable funds is _____ and interest rates are _____ than in countries with slowly growing economies.

The benefits of fixed exchange rates served as one of the motivations for the international system of fixed rates established after World War II.

Since governments control the quantity of the currency of their country, they have more control over exchange rates than other prices.

A country wants to maintain a fixed exchange rate with the dollar, but at the current exchange rate its currency is in excess. The country can adopt all of the following policies to maintain its exchange rate EXCEPT:

Explain the impact of an expansionary monetary policy in the United States, where exchange rates are floating.

Use the following to answer questions : Figure: The Loanable Funds Model in the U.S. Market -(Figure: The Loanable Funds Model in the U.S. Market) Look at the figure The Loanable Funds Model in the U.S. Market. If the actual interest rate is equal to 4% in the U.S. market, then the quantity supplied of loanable funds will be _____ the quantity of loanable funds demanded.