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

An improvement in the quality of U.S.goods would lead to a ________ in the demand for dollars and a ________ in the exchange rate.

A decline in the exchange rate could have been caused by which of these factors?

Under a system of fixed exchange rates,what happens if a country's currency is overvalued?

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

When the domestic currency buys fewer units of foreign currency,the

In the short run in the Keynesian model,an increase in the domestic money supply would cause domestic output to ________ and the domestic real interest rate to ________.

According to the "beachhead effect," in order to undo the effects of a strong-dollar period,the real value of the dollar

If the fundamental value of the exchange rate is ________ than the official (fixed)exchange rate,the country has an ________ problem,and it will gain reserves.

There's been a real depreciation of the dollar over the past month.In the long run,you would expect the quantity of

When a group of countries agree to share a common currency,they are said to have formed a

A classical economy is described by the equations AD: Y = 1000 + 100M/P AS: = 1500 The real exchange rate is 3 bushels/bottle,the domestic nominal money supply is 30 florins,and the foreign price level is 8 crowns/bushel. (a)What is the nominal exchange rate? (b)If the government wants to maintain an official nominal exchange rate of 6 crowns/florin,what must the nominal money supply be?

Goods market equilibrium in the open economy occurs when

Purchasing power parity does not hold in the short to medium run because

Compared with a system of fixed exchange rates,currency unions are beneficial because they

The currency created by the European Monetary Union,for which notes and coins became available in 2002,is the

The Bretton Woods system relied on

Relative purchasing power parity occurs when

What happens in the short run in the Keynesian model to the exchange rate and net exports in each of the following cases? (a)The foreign real interest rate falls. (b)Foreign output rises. (c)Foreign demand for domestic goods rises. (d)Domestic output rises. (e)The domestic real interest rate falls.

Empirical evidence shows that in the short run,purchasing power parity ________,and in the long run,purchasing power parity ________.

The Federal Reserve has just purchased bonds in the market,carrying out open market operations.In the short run in the Keynesian model,this would cause the foreign real interest rate to ________ and foreign output to ________.