Exam 15: Aggregate Demand, Aggregate Supply, and Inflation

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

Large economies, like the United States should ______ employ a flexible exchange rate, because giving up the power to stabilize the domestic economy via monetary policy _____.

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

Holding all else constant, a decrease in the real interest rate on Mexican assets will ______ the supply of dollars in the foreign exchange market and ______ the equilibrium Mexican peso/U.S. dollar exchange rate.

Suppose the price of gold is $300 per ounce in the United States and 2,400 pesos per ounce in Mexico. If purchasing power parity holds then, if the price of oil is $25 per barrel in the United States, the price of oil is ______ pesos per barrel in Mexico.

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

The nominal exchange rate, e, is defined as the number of units of:

As the U.S. dollar appreciates relative to other currencies, the dollar price of goods imported to the U.S. _____, causing net exports and GDP to ______.

In an open economy, an increase in the government's budget deficit will ______ the domestic real interest rate and ______ the level of capital investment in the country, holding other factors constant.

From the point of view of a particular country, capital outflows are:

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

Holding constant risk and the real returns available abroad, lower domestic real interest rates ______ capital inflows, ______ capital outflows, and ______ net capital inflows.

All else equal, relative to the case of a closed economy, monetary policy is ______ effective in an open economy with a ______ exchange rate.

The exchange rate that equates the quantities of the currency supplied and demanded in the foreign exchange market is called the ______ exchange rate.

In an open economy with flexible exchange rates, monetary policy affects consumption and investment by changing the ______ and affects net exports by changing the _____.

During the 1960s and 1970s, the U.S. trade balance was close to zero, but during the 1980s, the trade deficit ballooned to unprecedented levels due to:

The theory that nominal exchange rates are determined so that the law of one price holds is called:

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

From the point of view of a particular country, capital inflows are:

If the nominal exchange rate is 4 Israeli shekels per U.S. dollar, and 0.178 Jordanian dinars per Israeli shekel, then there are ______ Jordanian dinars per U.S. dollar.