Exam 14: Exchange Rate Adjustments and the Balance of Payments

Other things equal, to keep the yen's exchange value from appreciating against the dollar Japan's exchange stabilization fund would buy yen for dollars on the foreign exchange market.

Developing countries with more than one major trading partner often peg their currencies to a group or basket of those trading partner currencies.

A "dirty float" occurs when a nation uses central bank intervention in the foreign exchange market to promote a depreciation of its currency's exchange value, thus gaining a competitive advantage compared to its trading partners.

Given a two-country world, suppose Japan devalues the yen by 20 percent and South Korea devalues the won by 15 percent.Other things equal, this results in

Suppose Japan runs a trade deficit.Other things equal, if the Japanese yen appreciates against other currencies in the exchange markets, this will

Which exchange rate system involves a "leaning against the wind" strategy in which short-term fluctuations in exchange rates are reduced without adhering to any particular exchange rate over the long run?

As a policy instrument, currency devaluation may be controversial since it

Of the 188 members of the International Monetary Fund, the most frequently used exchange rate arrangement is

If Uganda devalues its shilling by 10 percent and Burundi devalues its franc by 5 percent, the shilling's exchange value appreciates 10 percent against the franc.

Which of the following is not a potential disadvantage of freely floating exchange rates?

A main purpose of exchange stabilization funds is to

Under the gold standard, the official exchange rate would be $2.80 per pound as long as the United States bought and sold gold at a fixed price of $35 per ounce and Britain bought and sold gold at 12.5 pounds per ounce.

Figure 15.1 shows the market for the Swiss franc. In the figure, the initial demand for marks and supply of marks are depicted by D0 and S0 respectively. Figure 15.1. The Market for the Swiss Franc ? -Refer to Figure 15.1.Suppose the United States _decreases investment spending in Switzerland, thus reducing the demand for francs from D₀ to D₂.Other things equal, under a floating exchange rate system, the new equilibrium exchange rate would be

When pursued over the long run, a policy of increasing the domestic money supply to offset an appreciation of the home country's currency results in inflation and a decrease in home-country competitiveness in key industries.

Other things equal, under adjustable pegged exchange rates, if the rate of inflation in the United States exceeds the rate of inflation of its trading partners

Under managed floating exchange rates, other things equal, a central bank would initiate

The revenue that a government received by issuing money is called a fiscal dividend.

In recent years, the United States has accused China of manipulating the yuan so as to gain an unfair competitive advantage in global trade.The United States has argued that China has

What is the difference between the crawling peg and adjustable pegged exchange rates?

Suppose that Bolivia uses a fixed exchange rate system.If it chooses to also allow free capital flows, which of the following policies will it NOT be able to adopt?