Exam 29: Macroeconomics in an Open Economy

If net exports are negative

The current account balance equals the value of net exports.

If American demand for purchases of Mexican goods has increased,how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

Use the saving and investment equation to explain why the United States experienced large current account deficits in the late 1990s.

If the government finances an increase in government purchases with an increase in taxes,which of the following would you not expect to see?

How will contractionary monetary policy in Japan affect the demand and supply of the yen in the foreign exchange market?

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

The United States has a trade ________ with all its major trading partners and a trade ________ with every region of the world except for Latin America.

If net exports are positive for China,it must be true that China is experiencing net outflows of capital.

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

Persistent current account deficits for the United States have

Which of the following is "crowded out" by higher interest rates that can be the result of expansionary fiscal policy?

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

Based on the following information,what is the balance on the current account? Exports of goods and services = $12 billion Imports of goods and services = $14 billion Net income on investments = -$4 billion Net transfers = -$1 billion Increase in foreign holdings of assets in the United States = $6 billion Increase in U.S.holdings of assets in foreign countries = -$3 billion

An economy that has interactions in trade or finance with other economies is referred to as

How might a budget deficit affect the balance of trade?

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

Article Summary In an effort to decrease an outflow of capital which has threatened to extend the country's economic slowdown,China's central bank sold $94 billion U.S.dollars in an attempt to support its currency,the yuan.The move followed the largest devaluation of the yuan in more than 20 years.According to analyst Li Miaoxian,"If the central bank continues its intervention,China's foreign-exchange reserves will continue to shrink -- the heavier the intervention,the deeper the fall.It's "inevitable" the nation will see continuous capital outflows and yuan depreciation pressure in the coming months.Over the past decade,the Chinese central bank had purchased dollars in an effort to stem the appreciation of the yuan during a period of a growing trade surplus.Now facing an increasing sell-off of the yuan,Bloomberg economists note that "The fear is that today's data will reinforce the market view that the only way for the yuan to go is down,and further accelerate capital outflows." -Refer to the Article Summary.All else equal,a depreciation of the Chinese yuan relative to a currency such as the U.S.dollar should ________ Chinese exports and ________ imports to China.

According to the saving and investment equation,if net foreign investment rises by $60 million

Suppose that domestic investment in Canada is 10.7% of GDP,and Canadian national savings is 13% of GDP.What is Canada's foreign investment as a percentage of GDP?