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

The Marshall-Lerner condition deals with the impact of currency depreciation on:

The time period that it takes for companies to form new business connections and place new orders in response to currency depreciation is known as the:

How do movements in exchange rates affect domestic costs,in the presence of foreign sourcing?

American citizens planning a vacation abroad would welcome:

An appreciation of the U.S.dollar tends to:

Assume that General Motors employs labor and materials,whose costs are denominated in dollars,in the production of automobiles.If the dollar's exchange value appreciates by 10 percent against the yen,the yen-denominated cost of a GM vehicle falls by 10 percent.

Which analysis considers the extent by which foreign and domestic prices adjust to a change in the exchange rate in the short run:

The Marshall-Lerner condition suggests that depreciation of the franc leads to a worsening of France's trade account if the:

The effect of currency depreciation on the purchasing power of money balances and the resulting impact on domestic expenditures is emphasized by the:

By decreasing the relative production costs of U.S.companies,a dollar appreciation tends to lower U.S.export prices in foreign-currency terms,which induces an increase in the amount of U.S.goods exported abroad.

The longer the currency pass-through period,the ____ required for currency depreciation to have the intended effect on the trade balance.

According to the J-curve effect,an appreciation of the yens exchange value has:

Assume the Canadian demand elasticity for imports equals 0.2,while the foreign demand elasticity for Canadian exports equals 0.3.Responding to a trade deficit,suppose the Canadian dollar depreciates by 20 percent.For Canada,the depreciation would lead to a:

According to the Marshall-Lerner condition,currency depreciation will worsen a country's balance of trade if the country's elasticity of demand for imports plus the foreign demand elasticity for the country's exports exceeds 1.0.

Which approach predicts that if an economy operates at full employment and faces a trade deficit,currency devaluation (depreciation)will improve the trade balance only if domestic spending is cut,thus freeing resources to produce exports?

From 1985 to 1988 the U.S.dollar depreciated over 50 percent against the yen,yet Japanese export prices to Americans did not come down the full extent of the dollar depreciation.This is best explained by:

Assume that Ford Motor Company obtains some of its inputs in Mexico (foreign sourcing).As the peso becomes a larger portion of Ford's total costs,a dollar depreciation leads to a (an)____ in the peso cost of a Ford vehicle and a (an)____ in the dollar cost of a Ford compared to the cost changes that occur when all input costs are dollar denominated.

In the early 1990s,the yen sharply appreciated against the dollar.To protect themselves from export reductions caused by the yen's appreciation,Japanese auto companies transferred increasing amounts of auto production from the United States to Japan.

Given favorable elasticity conditions,an appreciation of the yen results in

According to the absorption approach,the economic circumstances that best warrant a currency devaluation is where the domestic economy faces: