Exam 18: Macroeconomics in an Open Economy

When exchange rates are ________,we say that the country's exchange rate is fixed.

Table 29-2 -All else equal,a depreciation of the British pound relative to currencies such as the euro and the U.S.Dollar should ________ the current account balance in great Britain and therefore ________ the financial account balance in Great Britain.

Figure 29-3 -Refer to Figure 29-3. The depreciation of the euro is represented as a movement from

A decrease in the demand for U.S.assets by foreign investors causes a(n)________ in the demand for U.S.dollars and shifts the demand curve for dollars to the ________.

Explain and show graphically the effect of a decrease in U.S.budget deficits that decrease U.S.interest rates on the demand and supply of U.S.dollars for euros.

National saving equals

Figure 29-3 -Refer to Figure 29-3. Suppose that the U.S.government deficit decreases,causing interest rates in the United States to fall relative to those in the European Union. Assuming all else remains constant,how would this be represented?

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

Which of the following would decrease the current account balance of the United States?

The level of saving in the United States has historically been low relative to the level of domestic investment.Based on this information,we would expect that

If national saving increases,________.(Assume that the capital account is zero and net transfers are zero.)

If American demand for purchases of British goods has decreased,how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

Which of the following would decrease the balance on the current account?

Suppose that Federal Reserve policy leads to higher interest rates in the United States.How will this policy affect real GDP in the short run if the United States is a closed economy,and how will it affect real GDP in the short run if the United States is an open economy?

If the price level in the United States is 110,the price level is 135 in Mexico,and the nominal exchange rate is 12.5 pesos per dollar,what is the real exchange rate from the U.S.perspective?

In the United States,domestic investment is greater than national saving.

When net capital flows are negative,

Figure 29-3 -Refer to Figure 29-3. Italians cut back on smoking and cut their demand for American cigarettes in half.Assuming all else remains constant,this would be represented as a movement from

An increase in capital inflows will

Table 29-2 -If the demand for the yen increases relative to the dollar,which of the following would occur?