A country has a higher inflation rate than all other countries, and it has slower economic growth. The central bank does not intervene in the foreign exchange market. Complete the sentences. To preserve purchasing power parity, the exchange rate If investment from foreigners decreases due to the slow economic growth, the current account balance is becoming more OA. rises; positive OB. falls; positive OC. rises; negative O D. falls; negative It is expected that in the future the exchange rate will differential is OA. fall; positive OB. fall; negative OC. rise; positive OD. rise; negative The interest rate

A country has a higher inflation rate than all other countries, and it has slower economic growth. The central bank does not intervene in the foreign exchange market. Complete the sentences. To preserve purchasing power parity, the exchange rate If investment from foreigners decreases due to the slow economic growth, the current account balance is becoming more OA. rises; positive OB. falls; positive OC. rises; negative O D. falls; negative It is expected that in the future the exchange rate will differential is OA. fall; positive OB. fall; negative OC. rise; positive OD. rise; negative The interest rate

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 45P: Table 23.7 provides some hypothetical data on macroeconomic accounts for three countries represented...

See similar textbooks

Similar questions

Table 23.7 provides some hypothetical data on macroeconomic accounts for three countries represented by A. B, and C and measured in billions of currency units. In Table 23.7, private household saving is SH, tax revenue is T, government spending is G, and investment spending is Calculate the trade balance and the net inflow of foreign saving for each country. State whether each one has a trade surplus or deficit (or balanced trade). State whether each is a net lender or borrower internationally and explain.
In some cases, governments will intervene in the currency markets to incresae or decrease the value of the country's currency. Which of the following is an example of direct intervention in foreign exchange markets? A. The European Central Bank lowers interest rates to increase the value of the euro. B. The Japanese government purchasing JPY with USD to increase the value of the Japanese yen. C. China imposing barriers on imports from Europe. D. The U.S. lowers interest rates to decrease the value of the U.S. dollar.
Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market? a. A decrease in domestic interest rates O b. An increase in foreign interest rates c. Stable domestic prices while the nation's trading partners are experiencing 10 percent inflation O d. Domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices
Would each of the following transactions be includedin U.S. net exports or in U.S. net capital outflow?Indicate whether it would represent an increase or adecrease in that variable.a. An American buys a Sony TV.b. An American buys a share of Sony stock.c. The Sony pension fund buys a bond from theU.S. Treasury.d. A worker at a Sony plant in Japan buys someGeorgia peaches from an American farmer.
If there is a decrease in the desire of foreigners to purchase goods and services from the United States and a lower desire to invest in U.S. banks and businesses, then how would this affect the U.S. foreign exchange market? A. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would depreciate. B. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would appreciate. C. The equilibrium quantity of foreign currency would increase and the U.S. dollar would depreciate. D. The equilibrium quantity of foreign currency would increase and the U.S. dollar would appreciate.
The graph shows the supply curve of Canadian dollars. Draw a new supply curve that shows the effect of a rise in the expected future exchange rate. Label it. A change in the expected future exchange rate changes the supply of Canadian dollars________, and a change in Canadian demand for imports changes the supply of Canadian dollars O A. today; today B. in the future; today C. today; in the future D. in the future; in the future 120 MacBook Pro 110 100- 90- 80- 70- Exchange rate (Canadian cents per Canadian dollar) Click the graph, choose a tool in the palette and follow the instructions to create your graph. So 70 80 90 100 10 20 30 40 50 60 Quantity (billions of Canadian dollars per day) >>> Draw only the objects specified in the question.
Suppose an economy experiences a sudden increase in the national birth rate. If everything else is left constant, what happens to the Current Account Balance? O It improves because national investment decreases 6. It improves because national investment increase O It worsens because national investment increases OIt worsens because national investment decreases
Under a system of flexible exchange rates, what will correct a deficit in a country's balance of payments? a. an appreciation in the nation's currency b. a decline in the nation’s domestic price level c. a depreciation in the nation's currency d. an increase in the nation’s inflation rate 2. Which of the following would supply Canadian dollars to the foreign exchange market? a. an increase in the number of Canadians going to Las Vegas over the holidays b. an increase in spending due to American tourists in Canada c. the sale of a Canadian corporation to a German investor d. the sale of wheat from Manitoba to a European bakery
To address a persistent current account deficit in the balance of payments, a government could undertake measures such as: A) Discouraging foreign investment B) Reducing government spending on social services C) Devaluing the national currency to make exports more competitive increasing the importar iuxtry goods in the ance of any
20. According to the theory of uncovered interest parity, which of the following variables does not affect Argentina's current nominal exchange rate with the U.S.? a. Argentina's bond default risk. b. Argentina's nominal interest rate. c. Demand for Argentina's exports. d. The future nominal exchange rate between the two countries. e. None of the above: each of them affects the nominal exchange rate. 21. According to the theory of uncovered interest parity, Argentina's current nominal exchange rate with the U.S. depends on which of the following variables? a. The money multiplier u in Argentina. b. Autonomous spending in the U.S. c. The nominal interest rate in the U.S. d. Argentina's current account balance CA. e. None of the above.
Suppose that Americans decide to increase theirsaving.a. If the elasticity of U.S. net capital outflow withrespect to the real interest rate is very high, willthis increase in private saving have a large orsmall effect on U.S. domestic investment?b. If the elasticity of U.S. exports with respect to thereal exchange rate is very low, will this increase inprivate saving have a large or small effect on theU.S. real exchange rate?
The benefits of adopting a flexible exchange rate is that, a.in response to shocks to the demand for Australian exports, the value of the currency would adjust to moderate these effectsb. changes in the interest rate will have no effect on the exchange rate that is determined in the foreign exchange market c.the exchange rate can be more volatile d. an economy will be able to well predict the prices of exports and imports Why A is the correct answer? What is meant by a flexible exchange rate?