Exam 29: Macroeconomics in an Open Economy

If American demand for purchases of British goods has decreased, how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

You're traveling in Japan and are thinking about buying a new kimono. You've decided you'd be willing to pay $175 for a new kimono, but kimonos in Japan are all priced in yen. If the exchange rate is 89 yen per dollar, what is the highest price in yen you'd be willing to pay for a kimono? (Assume no taxes or duties are associated with the purchase.)

If net exports are positive for China, it must be true that China is experiencing net outflows of capital.

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

Currency traders expect the value of the dollar to rise. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?

An increase in United States net foreign direct investment would occur if

You're traveling in Japan and are thinking about buying a new kimono. You've decided you'd be willing to pay $175 for a new kimono, but kimonos in Japan are all priced in yen. If the kimono you're looking at costs 14,000 yen, under which of the following exchange rates would you be willing to purchase the kimono? (Assume no taxes or duties are associated with the purchase.)

If the exchange rate changes from $2.00 = 1 euro to $1.98 = 1 euro then

When a U.S. investor buys a bond issued in a foreign country

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

If the United States has a current account deficit and the capital account is zero, which of the following must be true?

Which of the following is not "crowded out" by higher interest rates as a result of expansionary fiscal policy?

If the price level in the United States is 110, the price level is 135 in Mexico, and the nominal exchange rate is 12.5 pesos per dollar, what is the real exchange rate from the U.S. perspective?

What effect does a depreciation of the dollar have on real GDP in the United States in the short run?

If national saving decreases

A decrease in U.S. federal government budget deficits that lowers U.S. interest rates relative to the rest of the world should

How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market.

Suppose the government cuts taxes. We would expect interest rates to ________ and the dollar to ________ in foreign exchange markets.

Since 1999, the U.S. ________ account has recorded relatively minor transactions, such as migrants' transfers, and sales and purchases of nonproduced, nonfinancial assets.

Article Summary Citing excessive currency regulation under the nation's previous regime, Uzbekistan's recently elected president, Shavkat Mirziyoev, announced a 50 percent devaluation of the Central Asian nation's currency, the soum, in September 2017. The devaluation changed the official exchange rate from 4,210.35 soum per U.S. dollar to 8,100 soum per U.S. dollar, putting it in line with the black market exchange rate. Economic slowdowns and falling currency values in China, Russia, and Kazikstan, Uzbekistan's largest export markets, have hurt this nation's economy which depends on commodity exports and remittances. According to Oleg Kouzmin, an economist at Renaissance Capital in Moscow, "The decision … helps reduce extreme disparities between official and 'grey market' exchange rates that were witnessed in Uzbekistan in the previous years. Economists generally love to see devaluations -- one of the things than makes them different from politicians -- devaluation always gives the country a chance for a fresh start." -Refer to the Article Summary. All else equal, a depreciation of the Uzbekistani soum relative to a currency such as the U.S. dollar should ________ the current account balance in Uzbekistan and therefore ________ the financial account balance in Uzbekistan.