Exam 18: Macroeconomics in an Open Economy

Figure 18-1 -Refer to Figure 18-1.The French fall in love with California wines and triple their purchases of this beverage.Assuming all else remains constant,this would be represented as a movement from

The current account does not include which of the following?

Why does continued foreign investment in U.S.stocks and bonds and foreign companies continuing to build factories in the United States result in a current account deficit in the United States?

How will contractionary monetary policy in Japan affect the demand and supply of the yen in the foreign exchange market?

Ceteris paribus,an increase in the government budget deficit increases interest rates in the United States and causes a real appreciation of the dollar.

If net foreign investment is negative,which of the following must be true?

Saving exceeds domestic investment in Japan,which generates a financial account deficit in Japan's balance of payments.

How will an increase in federal government spending without an increase in taxes affect real GDP and the price level in the short run in a closed economy and in an open economy?

Article Summary Over the past two years, the Indian rupee has fallen 26 percent in value against the U.S. dollar, reaching a record low of 61.80 rupees per dollar in August 2013. The decline reflects increasing capital outflows and pessimism regarding the government's attempts to reverse this trend. The Indian government was expected to announce potential measures to increase the inflow of capital, including the possibility of raising debt abroad, raising money from Indians who live abroad, easing restrictions on overseas borrowing, and raising interest rates. Critics argue that current and well-entrenched policies deter capital inflow from investors and corporations, and raising interest rates may reduce confidence in the economy, which experienced a decade-low growth rate of 5 percent in 2013. Source: Rafael Nam, "Rupee over 60: Why Indian currency weakness may be here to stay," Reuters, August 8, 2013. -Refer to the Article Summary.All else equal,a depreciation of the Indian rupee relative to a currency such as the U.S.dollar should ________ Indian exports and ________ imports to India.

In 2013,global profits for McDonald's ________ when measured in local currencies than they did when measured in dollars.This occurred because the value of the U.S.dollar increased relative to most other currencies.

If foreign holdings of U.S.dollars increase,holding all else constant,

In an open economy,the current account balance equals ________.(Assume that the capital account is zero and net transfers are zero.)

National saving equals

How does a decrease in the federal budget deficit affect the demand for dollars and the supply of dollars on the foreign exchange market?

Explain why economies with financial account surpluses usually have current account deficits.

An increase in capital outflows from the United States will

The decline in the value of the yen after 2012 occurred as a result of the Japanese central bank,the Bank of Japan,following an expansionary monetary policy.Investors expected that the result would be lower nominal Japanese interest rates and a higher inflation rate.In response,investors ________,causing the value of the yen to decline against the dollar.

If the Fed does not take into account the additional policy channels available in an open economy,then ________ when conducting contractionary monetary policy,