Exam 18: Macroeconomics in an Open Economy

Explain and show graphically the effect of a decrease in U.S.budget deficits that decrease U.S.interest rates on the demand and supply of U.S.dollars for euros.

Holding all else constant,an economic expansion in Mexico should decrease the demand for U.S.dollars.

Which of the following would increase net exports in the United States?

Figure 18-1 -Refer to Figure 18-1.Europe experiences an economic boom.Assuming all else remains constant,this would be represented as a movement from

Based on the following information,what is the balance on the current account? Exports of goods and services = $5 billion Imports of goods and services= $3 billion Net income on investments = -$2 billion Net transfers = -$2 billion Increase in foreign holdings of assets in the United States = $4 billion Increase in U.S.holdings of assets in foreign countries = -$1 billion

Which of the following transactions would be included in Germany's current account?

An expansionary monetary policy in the United States should

If the Fed is using policy to combat inflation,what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

When exchange rates are ________,we say that the country's exchange rate is fixed.

If net foreign investment in the United States is positive,how must national saving and domestic investment be related? (Assume that the capital account is zero and net transfers are zero.)

An increase in net foreign investment is possible through a decrease in national saving or a decrease in domestic investment.

Assuming the United States is the "domestic" country,if the real exchange rate between the United States and France increases from 1.5 to 1.8,

Expansionary fiscal policy should raise the exchange rate of the dollar.

A decision by foreign central banks to sell their holdings of U.S.Treasury bonds will

The late Hugo Chavez,Venezuela's former president,proposed that the independence of the Venezuelan central bank be eliminated.Given the research on the relationship between central bank independence and inflation,we should expect this event to cause inflation to ________ and the real exchange rate to ________ between the two counties.(Assume the nominal exchange does not change,and that the United States is the domestic country).

Table 18-1 -Refer to Table 18-1.Use the information in the table to prepare a balance of payments account and find the value of the statistical discrepancy.Assume that the balance on the capital account is zero.

If you know that a country's net foreign investment is positive,what does that tell you about the relationship between the country's national saving and private investment? (Assume that the capital account is zero and net transfers are zero.)

If the balance on the current account is $346 billion and the balance on the financial account is -$204 billion,what is the balance on the capital account,assuming no statistical discrepancy?

If net exports are positive,

Which of the following is not included in the balance of the financial account of the United States?