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Exam 18: Macroeconomics in an Open Economy

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Question 121

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How might a budget deficit affect the balance of trade?

A) A budget deficit raises interest rates,which raises exchange rates and increases the balance of trade.
B) A budget deficit raises interest rates,which raises exchange rates and reduces the balance of trade.
C) A budget deficit reduces interest rates,which raises exchange rates and reduces the balance of trade.
D) A budget deficit reduces interest rates,which reduces exchange rates and reduces the balance of trade.

E) A) and D)
F) A) and C)

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Question 122

Multiple Choice

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

A) the United States must be exporting less than it is importing
B) net capital flows must be positive
C) domestic saving is greater than domestic investment
D) net foreign investment must be negative

E) C) and D)
F) B) and D)

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Question 123

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If currency speculators decide that the value of the dollar should rise in the future relative to the yen,this will increase the demand for dollars and decrease the supply of dollars.

Between 2007 and 2011 the value of the U.S.dollar fell by more than 60 percent against the Japanese yen.This fall in the price of the dollar against the yen was ________ for Japanese companies that exported to the United States and ________ for U.S.companies that exported to Japan.

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

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

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

If we take into account transfer payments (TR) when we derive the saving and investment relationship,the saving and investment equation becomes

Figure 18-1 -Refer to Figure 18-1.Europe suffers a recession.Assuming all else remains constant,this would be represented as a movement from

The purchase of foreign stocks and bonds by a U.S.brokerage firm is an example of capital inflows to the United States.

You're traveling in Japan and are thinking about buying a new kimono.You've decided you'd be willing to pay $175 for a new kimono,but kimonos in Japan are all priced in yen.If the kimono you're looking at costs 14,000 yen,under which of the following exchange rates would you be willing to purchase the kimono? (Assume no taxes or duties are associated with the purchase.)

Why is the balance of payments always zero?

Explain the relationship between net exports and net foreign investment.

An increase in perceived risk of foreign assets increased both the financial account surplus and current account deficit in the United States during the late 1990s.

Monetary policy has a ________ effect on aggregate demand in a(n) ________ economy,and fiscal policy has a ________ effect on aggregate demand in a(n) ________ economy.

Based on the following information,what is the balance on the financial 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 = $5 billion Increase in U.S.holdings of assets in foreign countries = -$3 billion

If national saving decreases,

In 2012,global profits for McDonald's increased by 6.3 percent when measured in local currencies,but fell by 0.7 percent when measured in dollars.The reason for this discrepancy is the value of the

If net exports are equal to net foreign investment,which of the following is not true?

An increase in capital inflows will