ECON 2301 - Chapter 16

Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ________________ in the economy as a whole.

aggregate demand

A ______________________ monetary policy can be used to decrease aggregate demand because it _____________ exports and _________________ imports .

contractionary; reduces; stimulates

From a macroeconomic point of view, increases in ____________ are an addition to aggregate demand, while increases in ___________ are a subtraction from aggregate demand.

exports; imports

People or firms use one currency to purchase another currency at the _______________________.

foreign exchange market

The _____________________________ is the largest market in the world economy.

foreign exchange market

Expansionary monetary policy lowers ______________, and increases demand for investment and consumer borrowing, which shifts aggregate demand to the ________________.

interest rate; right

If Australia's exchange rate is stronger than the PPP rate for several years, which of the following will likely result?

its imports will increase

When a government uses a ______________ exchange rate policy, it usually allows the exchange rate to be set by the market.

soft peg

For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits.

swings in exchange rates

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _________________________.

the tools of demand and supply