Exam 29: Macroeconomics in an Open Economy

Assume the United States is the "domestic" country and China is the "foreign" country. Which of the following might increase the real exchange rate between the United States and China?

If foreign holdings of U.S. dollars increase, holding all else constant

The United States has a trade ________ with all its major trading partners and a trade ________ with every region of the world except for Latin America.

Which of the following would you expect to decrease both interest rates and exchange rates? (Assume exchange rates are stated in terms of foreign currency per domestic currency.)

Assume the United States is the "domestic" country and Switzerland is the "foreign" country. Which of the following might decrease the real exchange rate between the U.S. dollar and the Swiss franc?

Ceteris paribus, an increase in the government budget deficit increases interest rates in the United States and causes a real appreciation of the dollar.

China runs a current account surplus with the United States. Which of the following must be true about China's balance of payments with the United States?

An open economy is an economy that has

If the Fed pursues an expansionary monetary policy, investment in the United States will ________ and net exports will ________.

Ceteris paribus, an increase in the government's budget deficit will increase the current account deficit.

An economy that does not have interactions in trade or finance with other economies is referred to as

An increase in capital outflows from the United States will

If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market?

In an open economy, the current account balance equals ________. (Assume that the capital account is zero and net transfers are zero.)

If net exports are equal to net foreign investment, which of the following is not true?

The current account balance equals the value of net exports.

If foreign holdings of U.S. dollars decrease, holding all else constant,

The United States is called a debtor nation because

If a country has a fixed exchange rate

Ceteris paribus, a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to ________; i.e., the dollar ________ in value against the yen.