Exam 36: Exchange Rates and the Macroeconomy

Between 1981 and 1986, as the federal budget deficit increased,

In an open economy, an increase in ( G − T ) will

As the international value of the dollar rises, AS shifts outward and AD shifts inward.

If the international value of the dollar rises, the

Figure 36 -9 In Figure 36-9, the C + I + G + ( X − IM )₁ line is flatter than the C + I + G + ( X − IM )₀ line because the

When the dollar depreciates, the prices of imported inputs rise and the U.S. aggregate supply curve, therefore, shifts inward, pushing up the prices of American-made goods and services.

Theoretically, when a currency depreciates one can predict that

Explain how exchange rate changes affect aggregate demand.

A favorable supply shock abroad would

Figure 36-6 In Figure 36-6, an expansive monetary policy in a closed economy results in an equilibrium at point E. In our open economy, allowing for the induced change in the currency exchange rate, the final equilibrium will be at a point like

A decline in interest rates tends to expand the economy by depreciating the currency and raising net exports.

Figure 36-4 Which of the situations illustrated in Figure 36-4 shows a currency appreciation leading to disinflation?

A currency appreciation is disinflationary and contractionary if the

A rise in the domestic interest rate leads to capital inflows, which make the exchange rate appreciate.

Table 36-2 In Table 36-2, what is equilibrium GDP?

If a country tries to stimulate the economy with fiscal policy, the effects will be exchange rate

A rise in the domestic interest rate leads to capital

A currency appreciation

Table 36-2 In Table 36-2, what are net exports when GDP = 3,500?

An increase in the value of the U.S. dollar relative to the Japanese yen will