Exam 13: Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

A temporary decrease in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment)in the economy.

If a country has an overvaluation problem,the best solution is to

Identify changes in two variables that would shift the supply curve of dollars to the right.Identify changes in two variables that would shift the demand curve for dollars to the right.

What is purchasing power parity? Why might it not hold?

An exchange-rate system in which the nominal exchange rate is set by the government is known as

Suppose the dollar/euro exchange rate falls.Then

International businesses like a fixed-exchange-rate system because

The idea that similar foreign and domestic goods,or baskets of goods,should have the same price when priced in terms of the same currency is called

In the Keynesian model of an open economy,a temporary decrease in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment)in the economy.

The real exchange rate is

Suppose the euro/yen exchange rate falls while the dollar/yen exchange rate rises.What happens to the price of goods imported into Japan?

When the dollar rises relative to other currencies,

A decline in the domestic real interest rate would cause a ________ in net exports and a ________ in the exchange rate.

A decrease in the foreign real interest rate would cause the domestic country's net exports to ________ and cause the domestic country's IS curve to ________.

In a Keynesian model,what are the short-run effects on output,the real interest rate,and the real exchange rate,for both the domestic economy and a foreign economy,of a decline in investment?

When the nominal exchange rate in terms of dollars per yen rises,

A temporary increase in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment)in the economy.

Assume the United States is currently running a current account deficit.The most effective way of eliminating this current account deficit would be to temporarily ________ government purchases and ________ the domestic money supply.

Which of the following changes would cause American net exports to decrease?

An increase in domestic output would cause a ________ in net exports and a ________ in the exchange rate.