Exam 18: Macroeconomics in an Open Economy

If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro,then

Assuming no change in the nominal exchange rate,how will a higher rate of inflation in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)

The current account balance equals the value of net exports.

When net capital flows are negative

Assuming no change in the nominal exchange rate,how will a decrease in the price level in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)

If net foreign investment is positive,which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)

Which of the following would you expect to increase both interest rates and exchange rates?

If you know that a country's net foreign investment is positive,what does that tell you about the relationship between the country's national saving and private investment? (Assume that the capital account is zero and net transfers are zero.)

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

Based on the following information,what is the balance on the current account? Exports of goods and services = $5 billion Imports of goods and services = $3 billion Net income on investments = -$2 billion Net transfers = -$2 billion Increase in foreign holdings of assets in the United States = $4 billion Increase in U.S.holdings of assets in foreign countries = -$1 billion

Figure 18-1 -Refer to Figure 18-1.Europe experiences an economic boom.Assuming all else remains constant,this would be represented as a movement from

China runs a current account surplus with the United States.Which of the following must be true about China's balance of payments with the United States?

An increase in U.S.federal government budget deficits that raises U.S.interest rates relative to the rest of the world should

Which of the following is not "crowded out" by higher interest rates as a result of expansionary fiscal policy?

When the United States sends money to Indonesia to help tsunami survivors,in what account is this transaction recorded?

Net exports equals the balance of trade surplus.

Based on the following information from a balance of payments table,what is the balance on the financial account? Exports of goods and services = $12 billion Imports of goods and services = $14 billion Net income on investments = -$4 billion Net transfers = -$1 billion Increase in foreign holdings of assets in the United States = $5 billion Increase in U.S.holdings of assets in foreign countries = -$3 billion

Contractionary monetary policy and expansionary fiscal policy both reduce net exports in an open economy.

Table 18-1 -Refer to Table 18-1.Use the information in the table to prepare a balance of payments account and find the value of the statistical discrepancy.Assume that the balance on the capital account is zero.

Why is the U.S.trade deficit almost always larger than the U.S.current account deficit?