Exam 15: Aggregate Demand, Aggregate Supply, and Inflation

The law of one price states that if transportation costs are relatively small, then the:

In an open economy, domestic investment equals:

The gold standard is an example of a ______ exchange rate system.

A decrease in the nominal exchange rate, e, defined as the number of units of the foreign currency that one unit of the domestic currency will buy, indicates that the domestic currency has ______ relative to the foreign currency.

The real exchange rate is the:

Proponents of fixed exchange rates, who argue that fixed exchange rates eliminate uncertainty and therefore promote international trade, sometimes fail to recognize:

Holding all else constant, an increase in the preferences of Americans for Mexican goods will ______ the supply of dollars in the foreign exchange market and ______ the equilibrium Mexican peso/U.S. dollar exchange rate.

If a certain automotive part can be purchased in Mexico for 60 pesos or in the United States for $6.25 and if the nominal exchange rate is 8 pesos per U.S. dollar, then the automotive part:

Because many European nations have adopted the euro as their common currency, they are ______ able to conduct independent ______ policy.

The principal demanders of U.S. dollars in the foreign exchange market are:

If the United States has a $300 billion trade deficit, then there must be:

An increase in the real exchange rate will tend to ______ exports and to ______ imports.

The U.S. trade deficit has been mainly caused by:

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

If the exchange rate moves from 10 Mexican pesos per U.S. dollar to 8 Mexican pesos per U.S. dollar, then the Mexican peso has ______ and the U.S. dollar has _____.

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

Which of the following events will increase the domestic real interest rate in an open economy?

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

The price of the average domestic good or service relative to the price of the average foreign good or service, when prices are expressed in terms of a common currency is called the ______ exchange rate.

Which of the following equations is equivalent to the equation S - NX = I?