Exam 29: Macroeconomics in an Open Economy

A federal budget deficit ________ interest rates,which ________ exchange rates (foreign currency per domestic currency),and ________ the balance of trade.

What impact might an increase in the budget deficit have on interest rates and exchange rates?

If you know that a country's net foreign investment is positive,what does that tell you about the relationship between the country's national saving and private investment? (Assume that the capital account is zero and net transfers are zero. )

When the market value of the dollar falls relative to other currencies around the world,we say that

How does contractionary monetary policy affect net exports in the short run?

Figure 29-1 -Refer to Figure 29-1.Currency speculators believe that the value of the euro will decrease relative to the dollar.Assuming all else remains constant,how would this be represented?

An open economy is an economy that has

Expansionary fiscal policy crowds out both domestic investment and net exports.

Contractionary monetary policy and expansionary fiscal policy both reduce net exports in an open economy.

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

Suppose the Fed purchases Treasury securities.Interest rates in the United States will ________ and the U.S.dollar will ________ against foreign currencies.

How will an interest rate decrease in the United States affect equilibrium in the foreign exchange market?

If the demand for the yen increases relative to the dollar,which of the following would occur?

An economy that does not have interactions in trade or finance with other economies is referred to as

When a foreign investor buys a bond issued in the United States

An increase in capital outflows from the United States will

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

When the United States sends money to the Philippines to help typhoon survivors,the transaction is recorded in

Based on the following information,calculate public saving,net foreign investment,and national income. Private saving = $83 billion Exports = $125 billion Imports = $130 billion Consumption = $200 billion Private investment = $56 billion Government purchases = $38 billion

When exchange rates are ________,we say that the country's exchange rate is fixed.