Exam 18: Macroeconomics in an Open Economy

You're traveling in Ireland and are thinking about buying a new digital camera.You've decided you'd be willing to pay $125 for a new camera,but cameras in Ireland are all priced in euros.If the camera you're looking at costs 115 euros,under which of the following exchange rates would you be willing to purchase the camera? (Assume no taxes or duties are associated with the purchase.)

Suppose the majority of the shares of British Airways stock were sold to a firm in the United States.Assuming all else remains constant,this will

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

Which of the following would you expect to decrease both interest rates and exchange rates? (Assume exchange rates are stated in terms of foreign currency per domestic currency.)

What are the three main sets of factors that cause the supply and demand curves in the foreign exchange market to shift?

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain.

A decrease in capital outflows from the United States will

How will an interest rate decrease in the United States affect equilibrium in the foreign exchange market?

If the current account is in deficit and the capital account is zero,then

Which of the following would decrease the current account balance of the United States?

Explain why the budget deficit and the trade deficit are sometimes referred to as the "twin deficits."

The current account includes records of a country's

A country which incurs a current account deficit will most likely have a financial or capital account surplus.

You're traveling in Ireland and are thinking about buying a new digital camera.You've decided you'd be willing to pay $125 for a new camera,but cameras in Ireland are all priced in euros.If the exchange rate is 0.85 euros per dollar,what's the highest price in euros you'd be willing to pay for a camera?

Japan has a fairly high saving rate and the level of saving in Japan is above domestic investment.Use the saving and investment equation to explain what Japan is doing with this excess of saving above domestic investment.

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

An HMO hires radiology services from India to cut costs.If all else remains equal,this will

What impact might an increase in the budget deficit have on interest rates and exchange rates?

Suppose the majority of the shares of Ford stock were sold to a Japanese firm.Assuming all else remains constant,this will

Contractionary monetary policy should increase foreign financial investment in the United States.