Exam 22: The Economic Case for and Against Government: Five Topics Considered

There is a flexible exchange rate system and only two countries in the world,the United States and Mexico.If the inflation rate in the United States rises relative to the inflation rate in Mexico,it follows that

If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.01 = 1 yen,but currently the exchange rate is $0.009 = 1 yen,then with flexible exchange rates the dollar price of a yen will __________ and the yen will __________.

An American computer is priced at $1,200.If the exchange rate between the U.S.dollar and the Mexican peso is $0.09 = 1 peso,approximately how many pesos would a Mexican buyer pay for the computer?

Suppose the current exchange rate between the U.S.dollar and the Mexican peso is $0.10 = 1 peso.Furthermore,suppose the price level in Mexico rises 15 percent while the U.S.price level remains constant.According to the purchasing power parity theory,which of the following exchange rates comes closest to being the equilibrium exchange rate?

Economist Charles Kindleberger (a proponent of fixed exchange rates mentioned in the text)would agree with which of the following statements?

-Refer to Exhibit 35-4.Under a fixed exchange rate system,at the exchange rate of E₃,the dollar is __________ and there is a __________.

The foreign exchange market is the market where

One example of an optimal currency area is the states within the United States.

Which of the following points would not be used as an argument in support of the current international monetary system?

Suppose that prices in Japan increase by 8 percent while prices in the United States remain stable.We would expect that the result would be that in the foreign exchange market ___________________________,​ceteris paribus​.

Suppose the U.S.price level rises 25 percent at a time when Japan experiences stable prices.As a result,the U.S.demand for Japanese goods will __________,and the Japanese demand for U.S.goods will __________; in turn,this will increase the demand for Japanese yen and decrease the supply of Japanese yen; in turn,the dollar will depreciate and the yen will appreciate.

Suppose there are only two countries in the world,Mexico and the United States.In the foreign exchange market,it follows that the

Suppose there is a decrease in U.S.income and Mexican income does not change.We would expect to see

Research by economists Autor,Dorn,and Hanson revealed that during the period 1990 to 2007,U.S.regions that faced more competition from Chinese imports had _____________ unemployment rates and ______________ wages than U.S.regions that faced less competition from Chinese imports.

If labor is immobile between two countries,changes in relative demand for goods and services may pose major economic problems

The current international monetary system is best described as a

-Refer to Exhibit 35-5.Based on the information provided in this table,between Monday and Tuesday,the U.S.dollar ____________ against the Japanese yen and the yen _____________ against the U.S.dollar.

Suppose the current exchange rate between the U.S.dollar and the Mexican peso is $0.12 = 1 peso.Furthermore,suppose the price level in Mexico rises 25 percent while the U.S.price level remains constant.According to the purchasing power parity theory,what will be the equilibrium exchange rate?

Advocates of a fixed exchange rate system argue that fixed exchange rates promote international trade.

Assume that there are only two countries in the world,the United States and Japan.What creates the demand for and supply of Japanese yen on the foreign exchange market? Name three different things that could cause the yen to appreciate in value.