Exam 18: Macroeconomics in an Open Economy

You're traveling in Japan and are thinking about buying a new kimono.You've decided you'd be willing to pay $175 for a new kimono,but kimonos in Japan are all priced in yen.If the kimono you're looking at costs 14,000 yen,under which of the following exchange rates would you be willing to purchase the kimono? (Assume no taxes or duties are associated with the purchase.)

If net foreign investment in the United States is negative,how must national saving and domestic investment be related?

If there is currently a shortage of dollars,which of the following would you expect to see in the foreign exchange market?

How does a decrease in value of a country's currency relative to other currencies affect its balance of trade?

How does an increase in a country's exchange rate affect its balance of trade?

Figure 18-2 -Refer to Figure 18-2.Consider the market for U.S.Dollars against the British pound shown in the graph above.From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound.

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

Which of the following transactions would be included in Japan's current account?

Currency traders expect the dollar to depreciate.What impact will this have on equilibrium in the foreign exchange market?

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

A federal budget deficit ________ interest rates,which ________ exchange rates (foreign currency per domestic currency),and ________ the balance of trade.

The federal budget deficit and the trade balance are often referred to as the

Suppose that domestic investment in Japan is 20.2% of GDP,and Japanese national savings is 24% of GDP.What is Japan's foreign investment as a percentage of GDP?

An increase in the demand for American-made goods will

Monetary policy has a ________ effect on aggregate demand in a(n)________ economy,and fiscal policy has a ________ effect on aggregate demand in a(n)________ economy.

If net foreign investment in the United States is positive,how must national saving and domestic investment be related? (Assume that the capital account is zero and net transfers are zero.)

Assuming the United States is the "domestic" country,if the real exchange rate between the United States and France increases from 1.5 to 1.8

How does contractionary monetary policy affect net exports in the short run?

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

An economy that does not have interactions in trade or finance with other economies is referred to as