Week 14 Quiz

In the course's illustrative exchange-rate chain, the dollar goes from 1 dollar = 100 yen to 1 dollar = 120 yen. Which statement describes the move?

Select one.

• The dollar depreciated, because a bigger number of yen means a weaker dollar
• The dollar appreciated, because one dollar now buys more yen than before
• The dollar did not change, because only the yen's value moved
• The yen appreciated, because each yen now buys more dollars than before

Under a floating exchange rate, U.S. interest rates rise while interest rates abroad stay the same, all else equal. Which way does the dollar tend to move, and why?

Select one.

• It tends to appreciate, because foreign savers demand more dollars to buy U.S. bonds
• It tends to depreciate, because higher rates make borrowing in dollars costlier
• It stays the same, because the government sets a floating rate by decree
• It tends to depreciate, because U.S. savers supply more dollars to buy foreign bonds

A U.S. car is priced at 25,000 dollars. In the course's illustrative chain, the dollar goes from 1 dollar = 100 yen to 1 dollar = 120 yen, and the factory keeps its dollar price. What does the car cost a buyer in Japan after the move?

Select one.

• 2,500,000 yen
• about 208 yen
• 3,000,000 yen
• 30,000,000 yen

A machine made in Japan is priced at 1,200,000 yen. In the course's illustrative chain, the dollar goes from 1 dollar = 100 yen to 1 dollar = 120 yen. What does the machine cost a buyer in the United States after the move?

Select one.

• 12,000 dollars
• 144,000,000 dollars
• 1,000 dollars
• 10,000 dollars

All else equal, the dollar appreciates. What tends to happen to U.S. exports, U.S. imports, and net exports?

Select one.

• Exports fall, imports rise, and net exports fall
• Exports rise, imports fall, and net exports rise
• Exports fall, imports fall, and net exports stay the same
• Exports rise, imports rise, and net exports stay the same

All else equal, the dollar appreciates and U.S. net exports fall. On the AD–AS diagram, what happens?

Select one.

• The economy moves along aggregate demand to a higher price level
• Short-run aggregate supply shifts left, so the price level rises and real output falls
• Aggregate demand shifts left, so the price level and real output both fall
• Aggregate demand shifts right, so the price level and real output both rise

True or false: all else equal, a depreciation of the dollar that raises U.S. net exports is a movement along the aggregate demand curve rather than a shift of it.

True or false.

• True
• False

Which of these transactions add to the demand for U.S. dollars in the foreign-exchange market? Select every one that applies.

Select every option that applies.

• A family from abroad pays for a hotel stay in the United States
• A pension fund abroad buys U.S. government bonds
• A U.S. repair shop pays for a machine made in Japan
• A U.S. student pays rent for a semester abroad
• A buyer in Japan pays for a car made in the United States

In the course's illustrative national account, exports are 100 and imports are 150, in billions of dollars, with no income or transfer flows. Which pair of balances fits the balance-of-payments identity?

Select one.

• CA = +50 and FA = −50
• CA = −50 and FA = −50
• CA = −50 and FA = 0, because the deficit leaves the country for good
• CA = −50 and FA = +50

In the debate over a strong dollar and a current-account deficit, which statement is normative?

Select one.

• An appreciation makes U.S. exports pricier for buyers abroad
• Cheaper goods for households should count for more than export jobs
• The current account and the financial account sum to zero
• A lasting deficit raises the income paid abroad in future years