Exam 29: Macroeconomics in an Open Economy

If the United States is a "net lender" abroad,________.(Assume that the capital account is zero and net transfers are zero. )

If the Fed is using policy to combat inflation,what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

Which of the following will not shift the demand for the euro to the right?

Ceteris paribus,an increase in the government's budget deficit will decrease the financial account surplus.

Figure 29-1 -Refer to Figure 29-1.Italians cut back on smoking and cut their demand for American cigarettes in half.Assuming all else remains constant,this would be represented as a movement from

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

If the dollar appreciates against the Mexican peso

Currency traders expect the dollar to depreciate.What impact will this have on equilibrium in the foreign exchange market?

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

If national saving decreases

Figure 29-1 -Refer to Figure 29-1.Suppose that the U.S.government deficit causes interest rates in the United States to rise relative to those in the European Union.Assuming all else remains constant,how would this be represented?

If a country has a ________ exchange rate,its central bank must buy and sell its holdings of currencies to maintain a given exchange rate.

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's the difference between the nominal exchange rate and the real exchange rate?

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain.

Which of the following would increase the balance on the current account?

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

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

If the balance of the current account in the United States is -$900 billion,which of the following is most likely to be true?

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