Which approach predicts that is an economy operates a full employment and faces trade deficit currency devaluation will improve the trade balance only if domestic spending is cut thus freeing resources to produce exports ?

A. the absorption approaches
B. the marshall lerner approach
C. the monetary approach
D. the elasticities approach

The notion that, following a currency depreciation the balance of trade falls for a while before increasing is called an effect ?

A. relative price
B. elasticity
C. j curve
D. pass through

Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

A. Flow from the united states to foreign countries
B. Flow from foreign countries to the united states
C. Remain totally in foreign countries
D. Remain totally in the united states

Due to Japan’s high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?

A. Appreciation; trade surplus
B. Appreciation; trade deficit
C. Depreciation; trade surplus
D. Depreciation; trade deficit

Assume that a Big Mac hamburger cost $3 in the United States 2 pesos in Mexico The implied purchasing power parity exchange rate between the peso and the dollar is ?

A. 0.67 pesos = $1
B. 0.8 pesos = $1
C. 1.25 pesos = $1
D. 1.67 pesos = $1

Suppose that U.S dollar depreciates 70 percent against the yen yet Japanese export prices to Americans did not decrease by the full extent of the dollar depreciation. This is best explained by ?

A. partial currency pass through
B. complete currency pass through
C. partial j curve effect
D. complete j curve effect

Economic theory predicts that a currency depreciation will least lead to an improvement in the home country’s trade balance when ?

A. home demand for imports is inelastic and foreign export demand is inelastic
B. home demand for imports is elastic and foreign export demand is inelastic
C. home demand for imports is inelastic and foreign export demand is elastic
D. home demand for imports is elastic and foreign export demand is elastic

Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?

A. Faster economic growth than japan
B. Higher future interest rates than japan
C. More rapid money supply growth than japan
D. Higher inflation rates than japan

Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?

A. Decrease in the money supply
B. Increase in the money supply
C. Decrease in the money demand
D. None of the above

Assume that the United States faces a percent inflation rate while no (zero) inflation exists in Japan. According to the purchasing power parity theory over the long run the dollar would be expected to ?

A. Appreciate by 8 percent against the yen
B. Depreciate by 8 percent against the yen
C. Remain at its existing exchange rate
NonE of the above