Exam 20: Exchange Rates and The Macroeconomy

An increase in the price level in Japan relative to the price level in the United States would

If currency depreciates:

Figure 20-5 -Which of the graphs in Figure 20-5 are consistent with an appreciation of the U.S.dollar caused by an increase in U.S.interest rates?

The sum of capital inflows and the trade balance must be zero.

In an open economy,the government deficit is 400 and investment exceeds saving by 300,so in equilibrium the trade deficit (IM − X)must be

International capital flows in an open economy have the effect of

The sequence of events following an increase in the federal deficit would be higher interest rates,a(n)

A Japanese recession will be counteracted by an appreciation of the Japanese yen.

The different effects of fiscal and monetary policy in an open economy with mobile capital hinges on their different effect on

If the federal government has a deficit,and the current account is in balance,then

The expected effects of monetary expansion are

A rise in net exports shifts the aggregate

Figure 20-8 -Which of the graphs in Figure 20-8 illustrates the AD-AS shifts induced by the foreign sector following an increase in the U.S.federal deficit?

Interest rate increases lead to currency appreciation and increases in net exports.

Why is fiscal policy less effective in an open economy than in a closed economy?

The sequence of events following a contractionary monetary policy would be higher interest rates followed by dollar

An appreciation of the Japanese yen relative to the U.S.dollar will

A depreciation of the dollar will cause an increase in the Consumer Price Index.

From Table 20-1,find the trade deficit or surplus.

Despite the elimination of the federal budget deficit in the late 1990s,the trade deficit increased due to