Exam 14: Exchange-rate Adjustments and the Balance of Payments

The J-curve effect implies that in the short run a currency depreciation will result in a balance of trade surplus for the home country.As time passes,however,the home country's balance of trade will move toward deficit.

Complete currency pass-through arises when a 10 percent depreciation in the value of the dollar causes U.S.:

When manufacturing computer software,suppose that Microsoft Inc.uses labor and materials whose costs are denominated in dollars and francs respectively.If the dollar's exchange value depreciates 10 percent against the franc,the franc-denominated cost of the firm's software falls by 10 percent.

According to the J-curve concept,which of the following is false--that the effects of a currency depreciation on the balance of payments are:

According to the J-curve effect,a depreciation of the pound's exchange value has:

Assume that Brazil has a constant money supply and that it devalues its currency.The monetary approach to devaluation reasons that one of the following tends to occur for Brazil:

Suppose the dollar appreciates 10 percent against the Swiss franc.According to the J-curve effect,the U.S.balance of trade will initially worsen,but then improve as time passes.

The monetary approach emphasizes the effects of currency depreciation on the purchasing power of money,and the resulting impact on domestic expenditure levels.

How is the absorption approach used for analyzing the effects of currency devaluation?

The Marshall-Lerner condition illustrates

Table 14.1. Hypothetical Costs of Producing an Automobile for Toyota Inc. of Japan -Refer to Table 14.1.Assume that Toyota Inc.obtains all of its automobile inputs from Japanese suppliers.If the yen's exchange value appreciates from 200 yen = $1 to 100 yen = $1,the dollar-equivalent cost of a Toyota automobile equals:

The absorption approach suggests that one of the following causes a trade deficit to decrease following currency depreciation:

Currency devaluation is initiated by governmental policy rather than the free-market forces of supply and demand.

If a currency's exchange rate is undervalued,a government would likely initiate actions to devalue the currency.

The extent to which changing currency values result in changing prices of imports and exports is known as the J-curve effect.

According to the J-curve effect,currency depreciation:

The time period that it takes for companies to increase output of commodities for which demand has increased due to currency depreciation is known as the:

How do demand elasticities influence a country's trade position when exchange rates change?

The extent to which a change in the exchange rate leads to changes in import and export prices is known as:

The purpose of currency devaluation is to cause a depreciation in a currency's exchange value.