Graded assignment #12
To avoid the fall in the value of the Australian dollar against the U.S. dollar, the central bank of Australia could ______ Australian dollars. Such an action ______ signal a change in Australia's exchange rate policy.
buy; would
Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollars decreases, the Fed ______.
buys dollars to raise the exchange rate
Calling Out China's Tricks In 2016, the U.S. trade deficit with China hit an ever rising $350 billion, the largest deficit with any U.S. trading partner. Chinese currency, the yuan, has risen in value by 24 percent against the U.S. dollar since the Chinese government loosened its currency system in July 2005. However, U.S. manufacturers contend the yuan is still undervalued, making Chinese goods more competitive in this country and U.S. goods more expensive in China. China buys U.S. dollar-denominated securities to maintain the value of the yuan in terms of the U.S. dollar. Source: The New York Times, April 12, 2017 Explain how fixed and crawling peg exchange rates can be used to manipulate trade balances in the short run, but not the long run. Fixed and crawling peg exchange rates can be used to manipulate trade balances in the short-run by ______, but in the long run ______.
changing the relative prices of domestic goods and foreign goods; price levels adjust to determine the real exchange rate
If the government sector deficit increases, with no change in the private sector surplus, net exports ______.
decrease
uppose that the exchange rate rises from 0.75 euros per U.S. dollar to 0.78 euros per U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan to buy in the foreign exchange market? The quantity of U.S. dollars that people plan to buy in the foreign exchange market _______.
decreases and a movement up along the demand curve for U.S. dollars occurs
A fall in the expected future exchange rate ______ the demand for U.S. dollars. An increase in the U.S. demand for imports _______ the demand for U.S. dollars.
decreases; does not change
What makes the demand for U.S. dollars change? Upper A decrease in world demand for U.S. exports ______ the demand for U.S. dollars. A rise in the U.S. interest rate differential ______ the demand for U.S. dollars.
decreases; increases
What determines the real exchange rate and the nominal exchange rate in the long run? In the long run, the real exchange rate is determined by ______ and the nominal exchange rate is determined by ______.
demand and supply in the markets for goods and services; the quantities of money in two countries
What does interest rate parity mean? Interest rate parity means ______.
equal rates of return
What is a crawling peg and how does it work? A crawling peg exchange rate policy is one that _______. A crawling peg exchange rate is achieved _______.
follows a path determined by a decision of the government or the central bank; by central bank intervention in the foreign exchange market
Complete the sentences. The market in which the currency of one country is exchanged for the currency of another country is the ______. The price at which one currency exchanges for another currency is the ______.
foreign exchange market; exchange rate
Complete the sentences. A country that is lending more to the rest of the world than it is borrowing from the rest of the world is a ______. A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a ______.
net lender; creditor nation
In November 2015, the exchange rate was 1.33 Canadian dollars per U.S. dollar. By November 2016, the exchange rate had risen to 1.35 Canadian dollars per U.S. dollar. Explain the exports effect of this change in the exchange rate. As the exchange rate rises, prices of U.S.-produced goods and services to foreigners ______ and the volume of U.S. exports ______.
rise; decreases
choose the correct statement
China, Japan, and Saudi Arabia are net lenders. The United States is a net borrower.
You can purchase a laptop in Mexico City for 12 comma 960 Mexican pesos. If the exchange rate is 18 Mexican pesos per U.S. dollar and if purchasing power parity prevails, at what price can you buy an identical computer in Dallas, Texas?
720
Australia produces natural resources (coal, iron ore, natural gas, and others), the demand for which has increased rapidly as China and other emerging economies expand. Explain how growth in the demand for Australia's natural resources would affect the demand for Australian dollars in the foreign exchange market. Explain how the supply of Australian dollars would change. Explain how the value of the Australian dollar would change. Growth in the demand for Australia's natural resources _______. The value of the Australian dollar _______.
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The U.S. dollar exchange rate increased from $0.89 Canadian in June 2009 to $0.96 Canadian in June 2010, and it decreased from 83.8 euro cents in January 2009 to 76.9 euro cents in January 2010. What was the value of the Canadian dollar in terms of U.S. dollars in June 2009 and June 2010? Did the Canadian dollar appreciate or depreciate against the U.S. dollar over the year June 2009 to June 2010?
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The graph shows the demand curve for U.S. dollars. Draw a new demand 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 demand for U.S. dollars ______, and a change in the world demand for U.S. exports changes the demand for U.S. dollars ______.
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What is a flexible exchange rate and how does it work? A flexible exchange rate is one that _______. It works _______.
is determined by demand and supply in the foreign exchange market; with no direct intervention by the central bank
Complete the sentence. The exports effect is the result that the lower the exchange rate, other things remaining the same, the ______.
lower are the prices of U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports
Complete the sentence. The imports effect is the result that the higher the exchange rate, other things remaining the same, the ______.
lower are the prices of foreign-produced goods and services to Americans and the greater is the volume of U.S. imports
What determines the real exchange rate and the nominal exchange rate in the short run? In the short run, the nominal exchange rate is determined by ______. And in the short run ______.
the demand for U.S. dollars and the supply of U.S. dollars in the foreign exchange market; a change in the nominal exchange rate brings an equivalent change in the real exchange rate
The quantity of U.S. dollars demanded in the foreign exchange market depends on ______.
the exchange rate
What are the influences on the supply of U.S. dollars in the foreign exchange market? The main influences on the supply of U.S. dollars in the foreign exchange market include ______.
the exchange rate, U.S. demand for imports, interest rates in the United States and other countries, and the expected future exchange rate
Complete the sentence. The quantity of U.S. dollars supplied in the foreign exchange market depends on ______.
the expected future exchange rate
The demand for U.S. dollars changes when a change occurs in the ______.
world demand for U.S. exports
Today's exchange rate between the yuan and the U.S. dollar is 6.40 yuan per dollar and the central bank of China is buying U.S. dollars in the foreign exchange market. If the central bank of China did not purchase U.S. dollars would there be excess demand or excess supply of U.S. dollars in the foreign exchange market? Would the exchange rate remain at 6.40 yuan per U.S. dollar? If not, which currency would appreciate? If the central bank of China did not purchase U.S. dollars there would be an excess ______ of U.S. dollars in the foreign exchange market. The exchange rate ______.
supply; would not remain at 6.40 yuan per U.S. dollar. The Chinese yuan would appreciate
How is the equilibrium exchange rate determined? The equilibrium exchange rate is the exchange rate at which _______.
the quantity of dollars demanded equals the quantity of dollars supplied
Complete the sentence. If most prices increase in Japan and other countries but remain constant in the United States, ______.
then for purchasing power parity to hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases
Complete the sentence. If most prices have decreased in the United States and not decreased in Japan and other countries, ______.
then for purchasing power parity to hold, the value of the U.S. dollar in the foreign exchange market will rise
If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with
yuan, the Chinese currency.
How are net exports and the government sector balance linked? Net exports equals ______.
(T minus G) + (S minus I)
The graph shows the supply curve of U.S. dollars. The exchange rate is currently 100 yen per dollar. Over time, the exchange rate rises to 120 yen per dollar. Show the effect in the graph. Draw either a new supply curve or an arrow along the curve showing the direction of change.
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The price level in the Eurozone is 111.2, the price level in the United States is 111.5, and the nominal exchange rate is 0.8 euros per U.S. dollar. What is the real exchange rate expressed as Eurozone real GDP per unit of U.S. real GDP?
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The table gives some information about U.S. international transactions in 2015 Calculate the balance on the three balance of payments accounts. Was the United States a net borrower or a net lender? Explain your answer.
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The table gives some information about the U.K. economy. What is the relationship between the government sector balance and net exports?
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The table gives some items from the national income and product accounts. Calculate the government sector balance, the private sector balance, and net exports
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What happens if there is a shortage or a surplus of U.S. dollars in the foreign exchange market? If a shortage of U.S. dollars occurs in the foreign exchange market, the _______ and the exchange rate _______.
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he graph shows the demand curve for U.S. dollars. The exchange rate is currently 100 yen per dollar. Over time, the exchange rate rises to 120 yen per dollar. Show the effect in the graph. Draw either a new demand curve or an arrow along the curve showing the direction of change.
Picture
What are the transactions that the balance of payments accounts record? The ______ account records receipts from exports of goods and services sold abroad, payments for imports of goods and services from abroad, and ______.
Picutre
The U.S. dollar exchange rate increased from $1.24 Canadian in June 2015 to $1.29 Canadian in June 2016, and it decreased from 121 Japanese yen in June 2015 to 108 Japanese yen in June 2016. Did the U.S. dollar appreciate or depreciate against the Canadian dollar? Did the U.S. dollar appreciate or depreciate against the Japanese yen? Between June 2015 and June 2016, the U.S. dollar ______ against the Canadian dollar. Between June 2015 and June 2016, the U.S. dollar ______ against the Japanese yen.
appreciated; depreciated
Aussie Dollar Hit by Interest Rate Talk The Australian dollar fell against the U.S. dollar to its lowest value in the past two weeks. The CPI inflation was reported to be generally as expected but not high enough to justify previous expectations for an aggressive interest rate rise by Australia's central bank next week. Source: Reuters, October 28, 2009 What is Australia's exchange rate policy? Explain why expectations about the Australian interest rate lowered the value of the Australian dollar against the U.S. dollar. To avoid the fall in the value of the Australian dollar against the U.S. dollar, what action could the central bank of Australia have taken? Would such an action signal a change in Australia's exchange rate policy? Australia's exchange rate policy is a _______ exchange rate. Expectations about the Australian interest rate lowered the value of the Australian dollar against the U.S. dollar because _______.
flexible; the expectation that the interest rate would not rise lowered expectations of the future exchange rate
What are the influences on the demand for U.S. dollars in the foreign exchange market? The main influences on the demand for U.S. dollars in the foreign exchange market include ______.
the exchange rate, world demand for U.S. exports, interest rates in the United States and other countries, and the expected future exchange rate
Complete the sentence. The U.S. interest rate differential rises if ______, and the larger the U.S. interest rate differential, the ______ is the demand for U.S. dollars in the foreign exchange market.
the foreign interest rate falls; greater
