Exam 17: Basic Theories of the Balance of Payments

If U.S. export contracts are written in terms of foreign currency and import contracts are denominated in domestic currency, a devaluation of the dollar during the currency contract period

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Question 1

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Explain the elasticities and absorption approaches to the BOT. What is the most notable shortcoming of these approaches?

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Question 2

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The elasticities approach analyzes the effect of devaluation on the trade balance based on elasticities of supply and demand for foreign exchange and international trade. The absorption approach views the trade balance as the difference between what the economy produces and what it takes for domestic use or absorbs. Neither approach considers capital flows.

The notion that, following a devaluation, the BOT falls for a while before increasing is called a effect.

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Question 3

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Which of the following are theories of the BOT?

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Question 4

Which of the following is not appropriate, if we live in a world of fixed exchange rates?

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Question 5

Recent evidence regarding the exchange-rate pass-through effect in the U.S. reflects a declining trend. How can this be explained?

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Question 6

The net effect of a devaluation on economic growth depends on the mix of capital and labor utilized in the nation's export industries.

(True/False)

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Question 7

Suppose that the Japanese yen appreciates significantly at some point, thus making Japanese imports more expensive. Japanese exporters may lower their profit margins to reduce the effect of the yen appreciation on U.S. importers, producing a phenomenon known as

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Question 8

The reported reduction in the exchange-rate pass through to import prices means that U.S. inflation will be relatively insensitive to exchange rate changes.

(True/False)

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Question 9

The elasticities approach and the absorption approach are theories of the balance of trade that emphasize trade in real goods and have little to say about the capital account.

(True/False)

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Question 10

Under a managed float system, central banks can

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Question 11

Which of the following has been offered as a possible explanation to the evidence that the exchange-rate pass-through effect to import prices has been declining in developed economies?

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Question 12

The international adjustment mechanism for flexible exchange rates is the same as for managed float regimes.

(True/False)

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Question 13

In the case of purely flexible exchange rates, a decrease in domestic real income, with constant prices and domestic credit, will lead to

(Multiple Choice)

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Question 14

With a managed float, monetary disequilibrium is eliminated through

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Question 15

With fixed exchange rates, the adjustment to changes in international monetary conditions comes through

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Question 16

The analyzes the BOP and exchange rates in terms of money supply and money demand.

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Question 17

If devaluation does not improve the BOT, but only the BOP, this implies that

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Question 18

Which of the following is not correct for a small open economy?

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Question 19

The fact that the balance of trade normally falls before increasing after a devaluation is known as

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Question 20

Showing 1 - 20 of 43

Exam 17: Basic Theories of the Balance of Payments

If U.S. export contracts are written in terms of foreign currency and import contracts are denominated in domestic currency, a devaluation of the dollar during the currency contract period

Explain the elasticities and absorption approaches to the BOT. What is the most notable shortcoming of these approaches?

The notion that, following a devaluation, the BOT falls for a while before increasing is called a effect.

Which of the following are theories of the BOT?

Which of the following is not appropriate, if we live in a world of fixed exchange rates?

Recent evidence regarding the exchange-rate pass-through effect in the U.S. reflects a declining trend. How can this be explained?

The net effect of a devaluation on economic growth depends on the mix of capital and labor utilized in the nation's export industries.

Suppose that the Japanese yen appreciates significantly at some point, thus making Japanese imports more expensive. Japanese exporters may lower their profit margins to reduce the effect of the yen appreciation on U.S. importers, producing a phenomenon known as

The reported reduction in the exchange-rate pass through to import prices means that U.S. inflation will be relatively insensitive to exchange rate changes.

The elasticities approach and the absorption approach are theories of the balance of trade that emphasize trade in real goods and have little to say about the capital account.

Under a managed float system, central banks can

Which of the following has been offered as a possible explanation to the evidence that the exchange-rate pass-through effect to import prices has been declining in developed economies?

The international adjustment mechanism for flexible exchange rates is the same as for managed float regimes.

In the case of purely flexible exchange rates, a decrease in domestic real income, with constant prices and domestic credit, will lead to

With a managed float, monetary disequilibrium is eliminated through

With fixed exchange rates, the adjustment to changes in international monetary conditions comes through

The analyzes the BOP and exchange rates in terms of money supply and money demand.

If devaluation does not improve the BOT, but only the BOP, this implies that

Which of the following is not correct for a small open economy?

The fact that the balance of trade normally falls before increasing after a devaluation is known as

An Introduction to International Trade

Tools of Analysis for International Trade Models

The Classical Model of International Trade

The Heckscher-Ohlin Theory

Tests of Trade Models: the Leontief Paradox and Its After-math

Tariffs

Nontariff Barriers and Arguments for Protection

Commercial Policy: History and Practice

Preferential Trade Arrangements

International Trade and Economic Growth

An Introduction to International Finance

The Balance of Payments

The Foreign-Exchange Market

Prices and Exchange Rates: Purchasing Power Parity

Exchange Rates, Interest Rates, and Interest Parity

Foreign-Exchange Risk, Forecasting, and International Investment

Exchange Rate Theories

Alternative International Monetary Standards

International Banking, Debt, and Risk

Open-Economy Macroeconomic Policy and Adjustment

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