Exam 34: Exchange Rates and the Balance of Payments

What is a "credit entry" in Canada's balance-of-payments accounts?

Consider the balance of payments for a small country.Suppose that in this country private saving is $4 million,its investment is $10 million,government purchases are $6 million,and net tax revenues are $15 million in a given year.The current account balance for this country is a

Consider the following statement: "It is undesirable for Canada to have a current account deficit." Which of the following is implied by this statement?

Suppose there is a rise in the world price of Canada's imports.If the Canadian demand for imports has a price elasticity greater than 1 (elastic),the demand for foreign exchange will ________ and the Canadian dollar will ________.

FIGURE 34-2 Refer to Figure 34-2.If the exchange rate is e₁,there is

FIGURE 34-3 Refer to Figure 34-3.An increase in demand or decrease in the supply of foreign exchange will

The table below shows hypothetical indexes for the price levels for Canada and the United States and hypothetical nominal exchange rates between their currencies (the Canadian-dollar price of 1 U.S.dollar). TABLE 34-2 Refer to Table 34-2.According to the theory of purchasing power parity (PPP),the Canadian-U.S.exchange rate in 2018 should have been ________,meaning that the actual Canadian dollar in that year was ________ relative to its PPP value.

A Canadian traveling to the United States converts $100 Canadian into 85 U.S.dollars.One month later he does the same thing and receives only 80 U.S.dollars.There are no transactions costs.The Canadian-U.S.exchange rate has ________ and the Canadian dollar has ________ relative to the U.S.dollar.

Other things being equal,a depreciation of the domestic currency tends to

An appreciation of the Canadian dollar implies ________ in the value of the dollar relative to other currencies,such that ________.

To macroeconomists,"foreign exchange" refers to

If a Canadian company builds and operates a mine in Indonesia,in the foreign-exchange market there will be a(n)

Which of the following statements about Canada's balance of payments is correct?

Suppose the Bank of Canada raises its target for the overnight interest rate from 3% to 3.25%,while interest rates in other countries do not change.How will this policy action affect Canada's imports and exports?

The Chinese government fixes its exchange rate above its free-market equilibrium level.Its purpose in keeping the Chinese currency depreciated is probably to

FIGURE 34-3 Refer to Figure 34-3.An increase in demand for foreign exchange OR a decrease in the supply of foreign exchange may be due to

Suppose Canada has a flexible exchange rate.If there is a decline in the world price of copper (a major Canadian export),other exporting sectors of the Canadian economy will likely ________ due to the resulting ________ of the Canadian dollar.

For Canada,the term "exchange rate," as used by most economists,refers to

Under a system of flexible exchange rates,a nation which tightens its monetary policy would be likely to experience

If Canadian demand for French wine increases,the supply of Canadian dollars to the foreign-exchange market will ________ and the demand for euros will ________.