Exam 29: Macroeconomics in an Open Economy

Persistent current account deficits for the United States have

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

Which of the following would cause the dollar to appreciate?

You're traveling in Japan and are thinking about buying a new kimono. You've decided you'd be willing to pay $175 for a new kimono, but kimonos in Japan are all priced in yen. If the kimono you're looking at costs 14,000 yen, under which of the following exchange rates would you be willing to purchase the kimono? (Assume no taxes or duties are associated with the purchase.)

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.)

What two measures of macroeconomic activity are often referred to as the "twin deficits"?

Figure 29-2 -Refer to Figure 29-2. Which of the events below cause the shifts in the supply and demand curves in the market for dollars against the British pound shown in the graph above?

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

If the dollar appreciates, how will aggregate demand in the United States be affected?

Assume the United States is the "domestic" country and China is the "foreign" country. Which of the following might increase the real exchange rate between the United States and China?

Which of the following equations is true in an open economy?

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

If the demand for the yen increases relative to the dollar, which of the following would occur?

Figure 29-1 -Refer to Figure 29-1. Europe suffers a recession. Assuming all else remains constant, this would be represented as a movement from

The United States is called a debtor nation because

The current account balance equals the value of net exports.

Explain how "net capital flows" are related to "net foreign investment," "net foreign direct investment," and "net foreign portfolio investment."

If the exchange rate changes from $0.08 = 1 mexican peso to $0.09 = 1 mexican peso, then

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.

The balance of payments includes all of the following accounts except