Exam 18: Macroeconomics in an Open Economy

Explain and show graphically the effect of a decrease in U.S.budget deficits that decrease U.S.interest rates on the demand and supply of U.S.dollars for euros.

Explain how "net capital flows" are related to "net foreign investment," "net foreign direct investment," and "net foreign portfolio investment."

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

An increase in United States net foreign direct investment would occur if

In international exchange markets,a rise in interest rates in the United States will cause the demand for dollars to ________ and the supply of dollars to ________.

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

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

A rise in the dollar price of the Chinese yuan signals an appreciation of the yuan and a depreciation of the dollar.

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

Figure 18-1 -Refer to Figure 18-1.The appreciation of the euro is represented as a movement from

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

Ceteris paribus,a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to ________.I.e. ,the dollar ________ in value against the yen.

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

What effect does a depreciation of the dollar have on real GDP in the United States in the short run?

If the United States has a current account deficit and the capital account is zero,which of the following must be true?

Figure 18-3 -Refer to Figure 18-3.Consider the market for U.S.dollars against the Japanese yen shown above.An event which could have caused the changes shown in the graph would be

Explain why the budget deficit and the trade deficit are sometimes referred to as the "twin deficits."

If the dollar appreciates,how will aggregate demand in the United States be affected?

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

A Canadian oil company hires geological survey services from the United States.If all else remains equal,this will