Mega International Econ: True/False
10) In the foreign exchange market, a decrease in the exchange rate increases the quantity of dollars supplied.
f
11) According to the law of supply in the foreign exchange market, when the U.S. exchange rate rises, the quantity of U.S. dollars supplied will decrease
f
14) If U.S. interest rates are rise relative to foreign interest rates, in the foreign exchange market the demand for U.S. dollars will decrease
f
16) Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.
f
17) Purchasing power parity means equal rates of return.
f
2) "Currency appreciation" means the price of the currency is decreasing.
f
20) In the foreign exchange market, if the demand for dollars permanently decreases, the Fed can maintain the exchange rate at its old equilibrium level indefinitely by buying dollars
f
22) A country's balance of payment accounts include its government budget deficit or surplus.
f
23) The current account records foreign investment in the United States minus U.S. investment abroad.
f
26) If the official settlements account is zero, whenever the United States has a current account deficit, it must also have a capital account deficit.
f
27) Over the past decade, the United States has had a current account deficit and capital account deficit.
f
29) The United States is a creditor nation.
f
31) A net borrower country must also be a debtor nation.
f
8) The lower the exchange rate, the cheaper are foreign-produced goods and services.
f
9) Other things remaining the same, the higher the current exchange rate, the larger is the expected profit from buying dollars.
f
1) An exchange rate is the price of one country's currency in terms of another country's currency.
t
12) An increase in the U.S. interest rate differential increases the demand for dollars.
t
13) If the Fed raises the interest rate, in the foreign exchange market the demand for the U.S. dollar increases.
t
15) In the foreign exchange market, a decrease in the supply of dollars leads to an appreciation of the U.S. dollar.
t
18) In the short run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate
t
19) The exchange rate can be influenced by a nation's central bank.
t
21) When the demand for a currency permanently increases, that nation's central bank can maintain its fixed exchange rate indefinitely.
t
24) The official settlements account records the change in official U.S. reserves.
t
25) The sum of the current, capital and official settlements accounts is always zero.
t
28) In the market for international loans, most countries, including the United States, are net borrowers
t
3) If the exchange rate rises from 100 yen per dollar to 120 yen per dollar, the dollar has appreciated.
t
30) Currently, the United States is both a net borrower and a debtor nation
t
32) If net exports increases, but neither government expenditure nor net taxes change, saving must increase.
t
4) If the exchange rate falls from 120 yen per dollar to 110 yen per dollar, the dollar has depreciated.
t
5) If the yen appreciates in value against the dollar, the dollar must have depreciated against the yen
t
6) The demand for one money is the supply of another money.
t
7) A rise in the exchange rate leads to a decrease in the quantity of dollars demanded.
t
