Exam 14: Macroeconomics in an Open Economy

Graph the demand for and supply of Australian dollars for euros. Suppose the Reserve Bank of Australia decides to follow a contractionary monetary policy. Show graphically and explain the effect of this policy on the demand and supply of dollars and the resulting change in the exchange rate of euros for dollars. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Assume the exchange rate between the dollar and yen is ¥80= $1. Suppose that the exchange rate changes to ¥75 = $1. As a result of the change, there will be:

If the dollar appreciates against the yen, ceteris paribus, this will cause:

A large federal budget deficit will not lead to a current account deficit if private saving ________ or domestic investment ________.

In international exchange markets, a rise in interest rates in Australia, ceteris paribus, will cause the demand for dollars to ________ and the supply of dollars to ________.

Outline the three main components of the current account. _____________________________________________________________________________________________ _____________________________________________________________________________________________

The real exchange rate of British pounds to Australian dollars will increase if the British price level ________ and the nominal exchange rate of pounds to the dollar ________.

Experiences of other countries show support for the twin deficits hypothesis.

Which of the following would decrease the size of the deficit in the current account of Australia?

The 'balance of payments' is a:

Suppose that interest rates decrease in Japan and at the same time the Japanese economy is experiencing a recession. What will happen to the value of the dollar relative to the yen?

If foreign holdings of Australian dollars decrease, holding all else constant, the:

Refer to Figure 14.1 for the following questions. Figure 14.1 -Consider the market for dollars against the British pound shown in Figure 14.1. From this graph, we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound.

Assume that the exchange rate between the dollar and the euro is €0.6 = $1. Suppose the exchange rate changes to €0.50 = $1. Because of the change:

Suppose that the world is currently experiencing a period of strong economic growth. Both the European Union and Australia experience robust increases in income. Illustrate how this will affect the exchange rate using a graph of the demand and supply of dollars for euros. Will the dollar appreciate or depreciate against the euro? Explain why. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Which of the following is a 'capital outflow' from Australia?

Refer to Figure 14.1 for the following questions. Figure 14.1 -Refer to Figure 14.1. Which of the following events cause the shifts in the supply and demand curves in the market for dollars against the British pound shown in the graph above?

Refer to Figure 14.2 for the following questions. Figure 14.2 -Refer to Figure 14.2. Suppose that Italians reduce their demand for Australian steel by half. Assuming all else remains constant, this would be represented as a movement from:

A federal budget deficit may ________ exchange rates (foreign currency per domestic currency)and ________ the balance of trade for goods and services.

Since the 1970s, Australia's imports and exports have both grown from less than ________ of GDP, to approximately ________ of GDP by 2016.