Question 1

When the central bank of some country prints large quantities of money,that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Accepted Answer

When more money is printed, it increases the supply of money in the economy, which can lead to inflation. When inflation occurs, the value of currency decreases relative to the goods and services it can buy. Additionally, if a country's currency gets weaker, it will require more units of that currency to buy the same amount of foreign currency, which means the exchange rate will be lower.

Question 2

Why are net exports and net capital outflow always equal?

Accepted Answer

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Question 3

Derive the relation between savings,domestic investment,and net capital outflow using the national income accounting identity.

Accepted Answer

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Question 4

What does purchasing-power parity imply about the real exchange rate?

Accepted Answer

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Question 5

Other things the same,an increase in the foreign price level leads to an increase in the real exchange rate.

Accepted Answer

An increase in the foreign price level, other things being equal, would decrease the real exchange rate, as the real exchange rate is the relative price of domestic goods in terms of foreign goods. Higher foreign prices make foreign goods more expensive relative to domestic goods.

Question 6

List the factors that might influence a country's exports,imports,and trade balance.

Accepted Answer

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Question 7

How do the nominal exchange rate and the real exchange rate differ?

Accepted Answer

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Quiz 32: Open-Economy Macroeconomic Models