Exam 19: The World of International Finance

A(n)________ in U.S. interest rates will cause an increase in the demand for U.S. dollars and a(n)________ in the (per dollar)exchange rate.

Recall the Application about the price of Big Macs in China and around the world to answer the following question(s). The following table is taken from the Application. For several years, The Economist has measured the prices of Big Macs throughout the world and compared the price differences to exchange rates. -According to the table, when converted to U.S. dollars, Big Macs cost approximately ________ percent more in the United States than they do in China.

A(n)________ in U.S. prices will cause an increase in the demand for U.S. dollars and a(n)________ in the (per dollar)exchange rate.

According to the law of one price

A market exchange rate which has been adjusted for inflation is called a

The U.S. current account equals

A country undertakes a revaluation in order to

Suppose that the free market exchange rate for the dollar is 115 yen, but the U.S. and Japanese governments want it to be 120 yen/dollar. What can the governments do? Illustrate your answer with a graph.

Under the Bretton Woods system

Recall the Application about how the collapse of the housing boom and the worldwide recession of 2007 led to problems for some countries in the Euro-zone to answer the following question(s). When the euro was launched in 1999, the vision of its founders was to use the monetary union to further unify Europe economically and politically. They envisioned a large economic market, comparable to the United States with integrated goods and financial markets. They believed that by moving to a single currency with agreements on a number of fiscal rules that they could achieve economic stability and growth. -Recall the Application. Unlike the Euro-zone, the United States does not just have a single currency, but also has a ________ that provides transfers to areas in economic distress.

U)S. imports and exports both fell during the first quarter of 2009. The value of these imports and exports would be reflected in the United States

Under a fixed exchange rate system, if the inflation rate of the United States exceeds the inflation rate of other nations, the

If the exchange rate is 0.8 euro per dollar, one dollar is equal to 1.25 euros

Figure 19.1 -Referring to Figure 19.1, the peso is likely to appreciate if the exchange rate is either ________ or ________ pesos to the dollar.

What is the law of one price?

-Refer to Figure 19.3. At the exchange rate of 90 yen per dollar, the United States is experiencing a

A balance of payments deficit occurs if

If the dollar to euro exchange rate moves from 1.1 to 0.9 dollars per euro, then the dollar has ________ and the euro has ________.

If the price of papayas is 12 baht in Thailand and the exchange rate is 30 baht per dollar, then what is the dollar price of papayas?

Figure 19.1 -Referring to Figure 19.1, Mexican goods will become cheaper in the United States if the exchange rate goes from ________ to ________ pesos to the dollar.