Exam 29: 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.)

The United States has had negative net exports since 1975.This means that the United States has ________ since 1975.

The large budget deficits of the early 1990s resulted in large current account deficits.

Expansionary monetary policy will have what effect on the components of aggregate demand?

Figure 29-1 -Refer to Figure 29-1.Currency speculators believe that the value of the euro will increase relative to the dollar.Assuming all else remains constant,how would this be represented? A) Supply would decrease, demand would decrease and the economy moves from B to C to D. B) Supply would increase, demand would decrease and the economy moves from C to B to A. C) Supply would decrease, demand would increase and the economy moves from A to D to C. D) Supply would increase, demand would increase and the economy moves from D to A to B.

How does an increase in a country's exchange rate affect its balance of trade?

If national saving decreases,

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

Net foreign investment is equal to

Suppose that domestic investment in Japan is 20.2% of GDP,and Japanese national savings is 24% of GDP.What is Japan's foreign investment as a percentage of GDP?

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

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

Explain the relationship between net exports and net foreign investment.

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?

Monetary policy has a greater impact in an open economy than it does in a closed economy.

Monetary policy has a ________ effect on aggregate demand in a(n)________ economy,and fiscal policy has a ________ effect on aggregate demand in a(n)________ economy.

If the United States has a net export surplus,which of the following must be true?

Based on the following information,what is the balance on the financial 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

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

An increase in the government budget deficit will not lead to a current account deficit if domestic investment declines.