Question 1

The Japanese real interest rate declines relative to the German real interest rate.German net exports ________ and the German exchange rate ________.

Accepted Answer

The answer of The Japanese real interest rate declines relative...

Question 2

A decline in the domestic real interest rate would cause a ________ in net exports and a ________ in the exchange rate.

Accepted Answer

A decline in the domestic real interest rate would lead to an increase in net exports as domestic goods become relatively cheaper for foreigners. It would also lead to a depreciation (fall) in the exchange rate as lower interest rates reduce foreign investment in domestic assets, decreasing demand for the domestic currency.

Question 3

An increase in foreign output would cause the domestic country's net exports to ________ and cause the domestic country's IS curve to ________.

Accepted Answer

The answer of An increase in foreign output would cause...

Question 4

What is purchasing power parity? Why might it not hold?

Accepted Answer

The answer of What is purchasing power parity? Why might...

Question 5

An increase in domestic output would cause a ________ in net exports and a ________ in the exchange rate.

Accepted Answer

The answer of An increase in domestic output would cause...

Question 6

An improvement in the quality of U.S.goods would lead to a ________ in the demand for dollars and a ________ in the exchange rate.

Accepted Answer

An improvement in the quality of U.S. goods would make them more attractive to both domestic and international consumers, leading to an increase in demand for these goods. This, in turn, would increase the demand for dollars (as international buyers convert their currency to dollars to purchase the goods) and lead to a rise in the exchange rate, making the dollar stronger against other currencies.

Question 7

Under a flexible-exchange-rate system,an increase in the demand for Japanese yen would cause the U.S.dollar/Japanese yen exchange rate to

Accepted Answer

An increase in demand for the Japanese yen would cause a higher demand for the currency, which would lead to an appreciation of the yen relative to the US dollar. Therefore, the dollar would weaken and fewer yen would be required to purchase it, causing the exchange rate to rise.

Question 8

Which of the following changes would cause American net exports to decrease?

Accepted Answer

If American consumers shift their demand away from domestically produced goods, then fewer goods will be exported, leading to a decrease in net exports. A decrease in the real value of the dollar (A) would actually make American exports cheaper for foreign buyers, potentially increasing net exports. Similarly, an increase in foreign income (C) can lead to an increase in demand for American goods, also potentially increasing net exports. A decrease in American income (B) may lead to a decrease in overall demand for goods, including imports, but it is not a direct factor affecting net exports.

Question 9

A decrease in foreign output would cause the domestic country's net exports to ________ and cause the domestic country's IS curve to ________.

Accepted Answer

A decrease in foreign output would lead to a fall in the demand for domestic goods and services, which would result in a fall in net exports. This would shift the IS curve down, as there would be a lower level of output for any given interest rate.

Question 10

Identify changes in two variables that would shift the supply curve of dollars to the right.Identify changes in two variables that would shift the demand curve for dollars to the right.

Accepted Answer

The answer of Identify changes in two variables that would...

Question 11

In an open economy,a decrease in net exports because of reduced demand for domestic products by foreigners should cause the domestic real interest rate to ________ and should cause desired saving minus desired investment to ________.

Accepted Answer

The answer of In an open economy,a decrease in net...

Question 12

Goods market equilibrium in the open economy occurs when

Accepted Answer

The answer of Goods market equilibrium in the open economy...

Question 13

What happens in the short run in the Keynesian model to the exchange rate and net exports in each of the following cases?
(a)The foreign real interest rate falls.
(b)Foreign output rises.
(c)Foreign demand for domestic goods rises.
(d)Domestic output rises.
(e)The domestic real interest rate falls.

Accepted Answer

The answer of What happens in the short run in...

Question 14

A decline in domestic output would cause a ________ in net exports and a ________ in the exchange rate.

Accepted Answer

The answer of A decline in domestic output would cause...

Question 15

Which of the following changes would cause American net exports to increase?

Accepted Answer

An increase in foreign income would likely increase the demand for American goods and services, leading to an increase in American net exports. Option A would have the opposite effect, as a stronger dollar makes American exports more expensive for foreign buyers. Option B and D are unrelated to net exports.

Question 16

A decline in the exchange rate could have been caused by which of these factors?

Accepted Answer

The answer of A decline in the exchange rate could...

Question 17

Describe the effects of a rise in the domestic real interest rate on the exchange rate and on both domestic and foreign net exports.

Accepted Answer

The answer of Describe the effects of a rise in...

Question 18

In a flexible-exchange-rate system,the value of a currency is determined by

Accepted Answer

In a flexible-exchange-rate system, the value of a currency is determined by the demand and supply for the currency in the foreign exchange market. This means that the exchange rate for a currency will fluctuate based on the demand and supply for that currency in relation to other currencies. The government does not directly control the exchange rate in a flexible-exchange-rate system and the intersection of the IS and LM curves is a model used to analyze the economy in closed form, not the exchange rate. Swiss gnomes are not a factor in determining exchange rates.

Question 19

The U.S.real interest rate rises relative to the British real interest rate.British net exports ________ and the British exchange rate ________.

Accepted Answer

The answer of The U.S.real interest rate rises relative to...

Question 20

A rise in the domestic real interest rate would cause a ________ in net exports and a ________ in the exchange rate.

Accepted Answer

A rise in domestic real interest rates would cause a fall in net exports because higher interest rates would attract foreign capital inflows, causing an appreciation of the domestic currency. This, in turn, would make exports more expensive and result in a decrease in net exports. Therefore, the exchange rate would rise due to the appreciation of the domestic currency.

Quiz 13: Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

The Japanese real interest rate declines relative to the German real interest rate.German net exports and the German exchange rate .

A decline in the domestic real interest rate would cause a in net exports and a in the exchange rate.

An increase in foreign output would cause the domestic country's net exports to and cause the domestic country's IS curve to .

What is purchasing power parity? Why might it not hold?

An increase in domestic output would cause a in net exports and a in the exchange rate.

An improvement in the quality of U.S.goods would lead to a in the demand for dollars and a in the exchange rate.

Under a flexible-exchange-rate system,an increase in the demand for Japanese yen would cause the U.S.dollar/Japanese yen exchange rate to

Which of the following changes would cause American net exports to decrease?

A decrease in foreign output would cause the domestic country's net exports to and cause the domestic country's IS curve to .

Identify changes in two variables that would shift the supply curve of dollars to the right.Identify changes in two variables that would shift the demand curve for dollars to the right.

In an open economy,a decrease in net exports because of reduced demand for domestic products by foreigners should cause the domestic real interest rate to and should cause desired saving minus desired investment to .

Goods market equilibrium in the open economy occurs when

What happens in the short run in the Keynesian model to the exchange rate and net exports in each of the following cases? (a)The foreign real interest rate falls. (b)Foreign output rises. (c)Foreign demand for domestic goods rises. (d)Domestic output rises. (e)The domestic real interest rate falls.

A decline in domestic output would cause a in net exports and a in the exchange rate.

Which of the following changes would cause American net exports to increase?

A decline in the exchange rate could have been caused by which of these factors?

Describe the effects of a rise in the domestic real interest rate on the exchange rate and on both domestic and foreign net exports.

In a flexible-exchange-rate system,the value of a currency is determined by

The U.S.real interest rate rises relative to the British real interest rate.British net exports and the British exchange rate .

A rise in the domestic real interest rate would cause a in net exports and a in the exchange rate.