Macroeconomics

‭Chapter 7: Review Questions‬ ‭1.‬ ‭Country‬ ‭A‬ ‭and‬ ‭Country‬ ‭B‬ ‭are‬ ‭trading‬ ‭partners.‬ ‭If‬ ‭the‬ ‭real‬ ‭interest‬‭rate‬‭in‬‭Country‬‭A‬‭decreases‬ ‭relative‬‭to‬‭that‬‭in‬‭Country‬‭B,‬‭then‬‭which‬‭of‬‭the‬‭following‬‭would‬‭be‬‭true‬‭for‬‭Country‬‭B’s‬‭capital‬‭flow,‬ ‭currency value, and exports?‬ ‭Capital Flow‬ ‭Currency‬ ‭Exports‬

‭A.‬ ‭Outflow‬ ‭B.‬ ‭Inflow‬ ‭C.‬ ‭Inflow‬ ‭D.‬ ‭Outflow‬

‭Appreciation‬ ‭Depreciation‬ ‭Appreciation‬ ‭Appreciation‬

‭Decrease‬ ‭Decrease‬ ‭Decrease‬ ‭Increase‬

‭2.‬‭Assuming‬‭there‬‭is‬‭no‬‭statistical‬‭discrepancy‬‭on‬‭the‬‭balance‬‭of‬‭payments,‬‭a‬‭trade‬‭defcit‬‭must‬‭be‬ ‭offset somewhere else in the:‬ ‭A.‬ ‭capital and fnancial account only.‬ ‭B.‬ ‭current account only.‬ ‭C.‬ ‭net income from abroad account only.‬ ‭D.‬ ‭current or capital and fnancial account only.‬ ‭3.‬ ‭When‬ ‭the‬ ‭value‬ ‭of‬ ‭the‬ ‭Chinese‬ ‭Yuan‬ ‭appreciates‬ ‭relative‬ ‭to‬ ‭other‬ ‭currencies,‬ ‭which‬ ‭of‬ ‭the‬ ‭following is most likely to occur?‬

‭A.‬ ‭Exports from China will increase.‬ ‭B.‬ ‭Chinese residents will travel on more vacations to foreign countries.‬ ‭C.‬ ‭Investments in Chinese securities will increase.‬ ‭D.‬ ‭Imports into China will decrease.‬ ‭4. Which of the following will shift the demand curve for the U.S. dollar to the left?‬ ‭A.‬ ‭A decrease in the international demand for smartphones produced in the U.S.‬ ‭B.‬ ‭An increase in the disposable incomes of foreigners outside of the U.S.‬

‭C.‬ ‭A lower inflation rate in the U.S. relative to other countries.‬ ‭D.‬ ‭Expectations of an increase in the value of the U.S. dollar.‬ ‭5.‬‭Suppose‬‭that‬‭yesterday‬‭the‬‭U.S.‬‭dollar‬‭was‬‭trading‬‭at‬‭€1.1‬‭on‬‭the‬‭foreign‬‭exchange‬‭market,‬‭and‬ ‭today it is trading at €1.3. Which of the following is true?‬

‭A.‬ ‭The demand for European products has decreased.‬ ‭B.‬ ‭The U.S. dollar has appreciated.‬ ‭C.‬ ‭Interest rates in the Eurozone have decreased.‬ ‭D.‬ ‭The Euro has appreciated.‬

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