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

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 depreciates by 10 percent against the yen,the yen-denominated cost of a GM vehicle rises by 10 percent.

Appreciation of the dollar's exchange value worsens the international competitiveness of Boeing Inc.,whereas a dollar depreciation improves its international competitiveness.

Which approach analyzes a nation's balance of payments in terms of money demand and money supply?

When manufacturing automobiles,suppose that General Motors uses labor and materials whose costs are denominated in dollars and pounds respectively.If the dollar's exchange value appreciates by 15 percent against the pound,the pound-denominated cost of a GM vehicle rises by 15 percent.

The shift in focus toward imperfectly competitive markets in domestic and international trade questions the concept of:

According to the Marshall-Lerner approach,a currency depreciation will best lead to an improvement on the home country's trade balance when the:

The lag that occurs between changes in relative prices and the quantities of goods traded is the

According to the absorption approach (B = Y - A),currency devaluation improves a nation's trade balance if:

If foreign manufacturers cut manufacturing costs and profit margins in response to a depreciation in the U.S.dollar,the effect of these actions is to:

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

Complete currency pass through suggests that if the dollar's exchange value depreciates by 10 percent,imports will become 10 percent more expensive to Americans while U.S.exports will become 10 percent cheaper to foreigners.

According to the J-curve effect,currency appreciation:

According to the J-curve effect,when the exchange value of a country's currency appreciates,the country's trade balance:

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

The absorption approach to currency devaluation deals with the income effects of devaluation while the elasticity approach to devaluation deals with the price effects of devaluation.

Which of the following is true for the J-curve effect? It:

The analysis of the effects of currency depreciation include all of the following except the:

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 yen cost of a Toyota automobile equals:

The J-curve effect implies that the price elasticity of demand for imports and exports is more elastic in the short run than in the long run.

What is a pass-through relationship?