Unit 6: Open Economy: International Trade and Finance

If the United States dollar appreciates relative to the euro,

If real interest rates in the United States increase relative to real interest rates in Japan, which of the following will occur?

A current account deficit in the balance of payments means that

If the United States has a current account deficit, it must have

Under a flexible (floating) exchange rate system, which of the following would cause the U.S. dollar to depreciate?

An increase in the U.S. inflation rate relative to other countries will cause

Which of the following would be recorded in the financial account of the U.S. balance of payments?

Expansionary monetary policy in the U.S. will tend to cause which of the following in the foreign exchange market?

A tariff on imported goods will most likely result in

Free trade between nations is based on the concept of

Country A has a floating exchange rate. If Country A experiences higher economic growth than its trading partners, what is the most likely effect on its currency and trade balance?

In the foreign exchange market, the supply of U.S. dollars comes from

If Canada imposes tariffs on its imports from the United States, what will happen to the Canadian dollar and the U.S. dollar in the foreign exchange market?

Which of the following would cause the demand for the Japanese yen to increase in the foreign exchange market?

In the context of fiscal and monetary policy in an open economy, contractionary fiscal policy in the U.S. will tend to

A country with a trade deficit must be

Under a fixed exchange rate system, if a country's currency is overvalued relative to its equilibrium level, the government must

If the European Central Bank raises interest rates while the Federal Reserve keeps U.S. interest rates unchanged, what will happen in the euro-dollar exchange market?

Which of the following is an argument in favor of free trade?

If the United States has a comparative advantage in producing airplanes and Brazil has a comparative advantage in producing coffee, free trade will

An appreciation of the U.S. dollar will

If the U.S. experiences a recession, what will happen to U.S. imports and the value of the dollar?

If a country adopts a fixed exchange rate and pegs its currency at a rate below equilibrium (undervalued), the result will be

Which of the following is TRUE about exchange rates in a flexible (floating) system?

If Japan increases its purchases of U.S. Treasury bonds, what will happen to the value of the dollar and U.S. interest rates?

The terms of trade between two countries must fall between

If the Federal Reserve raises interest rates while overseas interest rates remain unchanged, the effect on the U.S. capital account and current account will be

If a country has a large and persistent current account deficit, which of the following must also be true?

Which of the following would cause the supply of U.S. dollars to increase in the foreign exchange market?

If both the U.S. and its trading partners simultaneously increase tariffs on each other's goods,

If the U.S. dollar depreciates against the British pound,

In an open economy, which of the following correctly links a budget deficit to foreign capital flows?

The balance of payments includes

A country has a trade deficit when

In a floating exchange rate system, the value of a currency is determined by

If U.S. interest rates increase relative to other countries, the dollar will likely

An appreciation of the U.S. dollar makes

If the exchange rate changes from [math]1 = ¥120, what has happened?

A tariff on imported goods will

Free trade benefits a country because it

The current account and the capital/financial account must

A depreciation of the U.S. dollar would cause U.S. net exports to

If the U.S. runs a current account deficit, it must have a

An import quota differs from a tariff because a quota

If demand for euros increases while supply stays the same, what happens to the dollar-euro exchange rate?

Expansionary monetary policy in the U.S. (lower interest rates) will cause the dollar to

In a fixed exchange rate system, when a country's currency faces downward pressure, the central bank must

The foreign exchange market is where

What is the new exchange rate if the demand for British pounds increases?

An increase in a country's price level relative to other countries will cause its currency to

Purchasing power parity (PPP) suggests that

If foreign investors increase their purchases of U.S. assets, this increases the

Contractionary fiscal policy (reduced government spending) will tend to cause the country's currency to

What is the trade balance for this country?

An increase in U.S. income (GDP) will likely cause

If the United States experiences higher interest rates relative to Europe, what is the expected effect on the exchange rate and net exports?

Country A has a current account deficit. Which of the following must be true?

The interest rate in the United States rises relative to interest rates in Japan. Using the foreign exchange market for the US dollar, what is the expected effect on the value of the dollar and US net exports?

A country runs a current account deficit of $50 billion. According to the balance of payments identity, what must be true about the capital (financial) account?

Country X imposes a tariff on imported steel. What are the effects on domestic steel producers, domestic consumers, and government revenue?