Exam 13: Exchange Rates and the Open Economy

If the nominal exchange rate were to be expressed as the number of units of domestic currency per unit of foreign currency, and that rate decreases, then the domestic currency has:

Trade within a country typically involves ______, while trade between countries normally involves _____.

When the Fed tightens U.S. monetary policy, domestic interest rates ______, making U.S. assets relatively more attractive to foreign investors, and ______ the equilibrium exchange rate.

Under a flexible exchange rate system a decline in the value of a currency relative to other currencies is a called a _______ and under a fixed exchange rate system a decrease in the official value of a currency is called a ________.

If the nominal exchange rate were to be expressed as the number of units of domestic currency per unit of foreign currency, and that rate increases, then the domestic currency has:

If two nominal exchange rates are given as 4 shekel/dollar and 0.711 dinar/dollar, so 1 dollar can buy either 4 shekels or 0.711 dinars, then each Jordanian dinar is worth _____ Israeli shekels, and each shekel is worth _____ dinars.

Suppose the government of South Island fixes the exchange rate of its currency, the Islandia, in terms of the U.S. dollar. Initially the exchange rate is set at $1 per Islandia. In a crisis, the government changes the exchange rate to $0.50 per Islandia. This is an example of a(n):

A speculative attack on an overvalued currency leads to a(n) ______ in international reserves and a(n) ______ in the fundamental value of the currency.

Each of the following would increase the supply of U.S. dollars, shifting the supply curve for dollars to the right, except:

Under a flexible exchange rate system an increase in the value of a currency relative to other currencies is a called a _______ and under a fixed exchange rate system an increase in the official value of a currency is called a ________.

Easy monetary policy will ______ net exports as a result of a ______ currency.

The real exchange rate is the:

Easy monetary policy reduces the real interest rate, which ______ the demand for dollars, ______ the supply of dollars, and ______ the equilibrium value of the dollar.

European households wishing to purchase shares of stock in an American company are ______ the foreign exchange market.

A currency appreciation is a(n):

If a country's international reserves are decreasing, then its exchange rate is ______ and there is a balance-of-payments _______.

An overvalued exchange rate is an exchange rate:

The net increase in a country's stock of international reserves over a year is called a(n):

Easy monetary policy _____ interest rates which _____ the demand for a currency and _____ the market equilibrium value of the exchange rate.

When the nominal exchange changes from 110 yen per dollar to 120 yen per dollar, the dollar has: