Exam 29: Macroeconomics in an Open Economy

If the current account is in surplus and the capital account is zero, then

You're traveling in Ireland and are thinking about buying a new digital camera. You've decided you'd be willing to pay $125 for a new camera, but cameras in Ireland are all priced in euros. If the camera you're looking at costs 115 euros, under which of the following exchange rates would you be willing to purchase the camera? (Assume no taxes or duties are associated with the purchase.)

If the dollar appreciates, how will aggregate demand in the United States be affected?

If the Fed does not take into account the additional policy channels available in an open economy, then ________ when conducting contractionary monetary policy.

When a foreign investor buys a bond issued in the United States

When the market value of the dollar rises relative to other currencies around the world, we say that

How does a decrease in value of a country's currency relative to other currencies affect its balance of trade?

Suppose China decides to sell a vast majority of their large holdings of U.S. Treasury bonds. If you are thinking of refinancing your house, how would China's action affect your decision to refinance?

Which of the following is true about the occurrence of the twin deficits?

The saving and investment equation holds only when the federal budget is balanced.

If currency speculators decide that the value of the dollar should rise in the future relative to the yen, this will increase the demand for dollars and decrease the supply of dollars.

A decrease in the demand for American-made goods will

In international exchange markets, a rise in interest rates in the United States will cause the demand for dollars to ________ and the supply of dollars to ________.

If net exports are positive

How is the impact of expansionary monetary policy different in an open economy than in a closed economy?

Based on the following information, what is the balance on the current account? Exports of goods and services = $5 billion Imports of goods and services = $3 billion Net income on investments = -$2 billion Net transfers = -$2 billion Increase in foreign holdings of assets in the United States = $4 billion Increase in U.S. holdings of assets in foreign countries = -$1 billion

The United States usually exports ________ goods than it imports and exports ________ services than it imports.

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 ________ foreign investment in Uzbekistan and ________ exports from Uzbekistan.

Assuming no change in the nominal exchange rate, how will a lower rate of inflation in the United States relative to Canada affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)

Assuming no change in the nominal exchange rate, how will a decrease in the price level in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)