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​ _______.

Picture

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​?

Picture

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​ ______.

Picture

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.

Picture

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?

Picture

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.

Picture

The table gives some information about the U.K. economy. What is the relationship between the government sector balance and net​ exports?

Picture

The table gives some items from the national income and product accounts. Calculate the government sector​ balance, the private sector​ balance, and net exports

Picture

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​ _______.

Picture

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