Exam 15: Exchange Rate Systems and Currency Crises

Changes in a country's net exports, investment spending, or government spending will cause its aggregate demand curve to shift.

Given fixed exchange rates, assume Mexico initiates expansionary monetary and fiscal policies to combat recession.Other things equal, these policies will also

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary fiscal policy is implemented to combat recession.Other things equal, the initial and secondary effects of the policy

What policy instrument should be used when demand-pull inflation exists?

Under floating exchange rates and high capital mobility, an expansionary monetary policy would help a country resolve a recession and a current account deficit.

Economic policymakers have typically adopted expenditure-increasing policies to combat inflation and expenditure-reducing policies to combat recession.

A nation realizes overall balance when it achieves full employment and current account equilibrium.

Given a system of floating exchange rates and high capital mobility, other things equal an expansionary monetary policy by the Federal Reserve will cause

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary monetary policy is implemented to combat recession.The initial and secondary effects of the policy have conflicting effects on aggregate demand, thus weakening the policy's expansionary effect.

Given an open economy with high capital mobility, monetary policy is strengthened under fixed exchange rates.

Assume a system of floating exchange rates and high capital mobility.In response to relatively high domestic interest rates, suppose that foreign investors place their funds in domestic capital markets.The result would be

A nation experiences internal balance if it achieves

At the ________, the Group-of-Five nations agreed to intervene in the currency markets to promote a depreciation in the U.S.dollar's exchange value.

Suppose Brazil has a fixed exchange rate, and it faces domestic recession and a trade surplus.Assuming it desires overall balance, if Brazil revalues its currency, other things equal one would expect which of the following to occur?

Historically, most nations generally considered _________ as the most important economic goal.

Which policy is an example of an expenditure-switching policy?

Which of the following explains why the aggregate supply curve is generally upward sloping?

Exhibit 15.1 At the Plaza Accord of 1985, the Group-of-Five nations agreed to drive the value of the dollar downward (i.e., depreciation) so as to help reduce the U.S. trade deficit. Answer the following question(s) on the basis of this information. -Refer to Exhibit 15.1.Other things equal, to help drive the dollar's exchange value downward, the Federal Reserve would

All of the following are obstacles to international economic policy coordination except

Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency.Other things equal, this also causes the