Lecture 5 - Clicker Questions

FX Forward Premium is Calculated as:

(The forward rate minus the spot rate) divided by the spot rate

If the foreign interest rate is 4% and the domestic interest rate is 5%, then the forward premium is approximately: (

-1%

If 5 Swiss francs trade for $1, the U.S. price level equals $1 for a good, and the Swiss price level equals 2 francs for the same good, then the real exchange rate between Swiss goods and U.S. goods is _____ Swiss good(s) per U.S. good.

2.5

Why does the trade balance with China receive so much attention? (

Commentators do not recognize that bilateral trade balances do not matter

. What do we call this equation: S − I = NX ? (

National income accounts identity

What do we call the difference between what a country produces and what it demands for consumption, investment, and government purchases?

Net exports

Which is NOT an explanation for the lack of capital flows into poorer countries? (

Poorer countries exhibit rising marginal productivity of capital.

What must be TRUE if domestic saving is $100 and domestic investment is $110?

The net capital inflow is $10

. Which statement is NOT TRUE?

The net capital outflow equals the opposite of the trade balance.

According to the model of a small open economy in the chapter, which is NOT a result of protectionist trade policies?

The trade balance becomes more positive.

Which statement is TRUE?

Trade deficits do not always signify a serious problem

Say e is the nominal exchange rate between Merkan dollars and Furnland krone, P is the price level in Merka, and P* is the price level in Furnland. What is the real exchange rate, 𝜖?

e = P over P * on bottom P