AP Macro - Exchange Rates and Trade Per 5

An increase in the international value of the dollar (appreciation) would most likely benefit who the most?

• domestic producers who export
• citizens traveling or living abroad from the United States
• German citizens vacation in the U.S.
• Canadian citizen looking to buy property in the U.S.

If the U.S. dollar depreciates relative to another currency, which of the following is most likely to occur?

• U.S. exports will increase to that country
• U.S. government will increase the tariff on goods from that country
• U.S. trade deficit will become larger to that country
• U.S. tourists will visit that country in greater numbers

Which of the following is most likely to benefit from an appreciation of U.S. currency?

• U.S. investors in foreign assets, like bonds, savings accounts, stocks
• importers in foreign countries seeking cheaper raw inputs
• U.S. exporters selling capital equipment to the rest of the world
• U.S. travelers to foreign countries

An increase in U.S. imports will result in which of the following in foreign exchange markets?

• increased foreign demand for U.S. dollars
• Decreased supply of U.S. dollars
• Increased U.S. demand for foreign currency
• a decrease in the value of foreign currency

Suppose consumers buy more imported goods and less domestic goods. Which is true?

• trade balance moves towards a deficit and equilibrium GDP decreases
• trade balance moves towards a deficit and GDP increases
• trade balance moves towards a surplus and GDP increases
• trade balance in unaffected and equilibrium GDP decreases

Assume the FED pursues expansionary monetary policy. Based on the resulting change in interest rates, which of the following will happen to the international value of the dollar, imports, and exports.

• Value of dollar increases, imports and exports both increase
• value of dollar increases, imports increase and exports decrease
• value of dollar decreases, imports increase, and exports decrease
• value of dollar decreases, imports decrease and exports increase

Which of the following is most likely to cause an increase in the international value of the dollar?

• Higher U.S. interest rates
• lower U.S. government spending
• higher real interest rates abroad
• expansionary monetary policy in the U.S.

Which of the following would lead to depreciation of a nation's currency?

• lower inflation in that nation relative to the world
• higher required reserve ratios in that nation relative to the rest of the world
• decreased interest rates in that nation relative to the rest of the world
• increased demand for that nation's currency

Following a decrease in the interest rates for a country, there is an outflow of currency. this increase in capital outflows will have what impact on exports, aggregate demand, and price level.

• exports and aggregate demand will increase while price level falls
• exports increase while AD and PL falls
• All three increase
• exports and aggregate demand decreases while PL rises

Suppose country A is experiencing high levels of inflation relative to country B. Which of the following occurs in the foreign exchange market?

• increased demand for country A's currency
• increase supply of country B's currency
• a decrease in the supply of country A's currency
• depreciation of country A currency