Exam 15: Aggregate Demand, Aggregate Supply, and Inflation

Holding all else constant, an increase in Mexican real GDP will ______ the demand for dollars in the foreign exchange market and ______ the equilibrium Mexican peso/U.S. dollar exchange rate.

Proponents of fixed exchange rates argue that the predictability of the fixed exchange rate:

As U.S. real GDP rises, wealthier households may decide to buy ______ foreign goods and assets, which would cause a(n) ______ of the U.S. dollar.

All else equal, if U.S. stocks are perceived to have become riskier compared to financial investments in other countries, then the market equilibrium value of the exchange rate for the U.S. dollar will:

The price of gold is 300 U.S. dollars per ounce in New York and 435 Canadian dollars per ounce in Toronto, Canada. If the law of one price holds for gold, the nominal exchange rate is ______ Canadian dollars per U.S. dollar.

For a given domestic and foreign price level, an increase in the nominal exchange rate ______ the real exchange rate.

An increase in the value of a currency relative to other currencies is called a(n):

In an open economy with a given level of real interest rates and risk, an increase in real interest rates abroad will ______ capital inflows and ______ the equilibrium domestic real interest rate.

There is ______ connection between the strength of a country's currency and the strength of its ______.

When a Peruvian buys a U.S. government bond, from the perspective of Peru, this is a(n):

In an open economy, if domestic citizens decide to save more, then the domestic real interest rate will ______ and the level of capital investment in the country will _____, holding other factors constant.

If one euro nation is experiencing rapid growth and inflation while another is facing sluggish growth and recession:

Based on the purchasing power parity theory, in the long run, currencies of countries with significant inflation will tend to:

If domestic saving is less than domestic investment, then a country will have a ______ and positive net capital ______.

The foreign exchange market is the market on which ______ of various nations are traded for one another.

When a U.S. oil company purchases oil from Saudi Arabia and the Saudi Arabian firm uses the proceeds from its sale of oil to the U.S. to buy transportation services from the U.S., U.S. net exports ______ and the capital inflow to the United States ______.

At each value of the domestic interest rate, decreases in the riskiness of domestic assets ______ capital inflows, ______ capital outflows, and ______ net capital inflows.

U.S. firms wishing to purchase European goods and services are ______ the foreign exchange market.

An economy with a trade deficit must also have:

A fixed exchange rate is an exchange rate whose value: