ECON102 Chapter Notes - Chapter 12: Exchange Rate, Trade-Weighted Effective Exchange Rate Index, Capital Outflow

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OC296547

15 Apr 2015

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University of Alberta

Department

Economics

Course

ECON102

Professor

Andrew Wong

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ECON102 Full Course Notes

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Trade allows people to produce what they produce best and to consume the great variety of goods and services produced around the world. Closed economy: an economy that does not interact with other economies in the world. Open economy: an economy that interacts freely with other economies around the world. The flow of goods: exports, imports, and net exports. Exports: goods and services that are produced domestically and abroad. Imports: goods and services that are produced abroad and sold domestically. Net exports/trade balance: the values of a nation"s exports minus the value of its imports. Net exports = value of country"s exports value of country"s imports. Tells us whether the country is a seller or buyer in the world markets for goods and services. Positive/trade surplus: exports > imports the country sells more goods and services abroad than it buys from other countries.

Related Questions

Urgent! I need help with these questions, please.

1- The GDP of Mexico in current US dollars according to the World Bank was the US $0.683 Trillion in 2000 and had grown to the US $1.151 Trillion in 2015. Calculate the GDP percentage change from 2000 to 2015. Show your work.

2- In the expenditure approach to GDP, government purchases include all spending on goods, services, and transfer payments by government agencies.

A- True
B- False

3- The economy is considered at full employment when:
A. the unemployment rate is zero.
B. structural unemployment is zero.
C. cyclical unemployment is zero.
D. frictional unemployment is zero.

4- Which of the following would be considered 'private investment' in GDP?
A. A computer printer purchased by a law firm
B. A computer printer purchased by a student
C. A computer printer purchased by the St. Louis police department
D. All of these

5- Goods that are not sold during the year are included as part of that year's investment in calculating GDP.
A-True
B- False

6- When the nominal GDP has increased in the United States, we know that:

A- the U.S. price level has increased
B- the U.S. price level has decreased.
C- U.S. output of goods and services has increased.
D- Either U.S. output of goods and services or the price level has increased.
E- Both U.S. output of goods and services and the price level have increased.

7- Fill in the blank: GDP is the total value of ________ produced for the marketplace during a given year, within the nation's borders

A- all goods
B- all goods and services
C- all final goods
D- all final goods and services
E- all final and intermediate goods and services

8- Structural unemployment is considered a microeconomic problem.

A- True
B- False

9- The unemployment rate in the United States is defined as the number of unemployed divided by _____.
A- the U.S. population
B- the number of employed plus the number of unemployed
C- the U.S. population over the age of 16
D- the number of employed
E- the number of employed minus the number of unemployed

10- If Americans buy $500 billion worth of foreign goods and services, and foreigners buy $200 billion worth of American goods and services, then net exports for the United States are equal to _____.
A. $100 billion
B. $200 billion
C. -$300 billion
D. $500 billion
E. $700 billion

11- Discouraged workers are people who used to work, but no longer want a job.

A- True
B- False

12- In the expenditure approach, GDP is equal to _____.

A. C + I + G + exports - imports

B. C + I + G

C. C + I + G + exports

D. C + I + G + imports

E. C + I + G + exports + imports

13- U.S. GDP measures the production of goods and services by Americans, regardless of which country they reside in when they produce those goods and services.

A- True
B- False

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Q46. An appreciation of the U. S. dollar would
a. encourage foreigners to invest in the United States
b. discourage foreigners from buying U. S. goods
c. discourage the travel abroad of U. S. citizens
d. encourage foreign travel in the United States

Q47. The financial account of the balance of payments includes the purchase and sale of physical assets but not of financial assets.
a. true
b. false

Q48. Special Drawing Rights are issued by the
a. International Monetary Fund
b. Bretton Woods Organization
c. General Agreement on Tariffs and Trade
d. World Bank

Q49. The balance of payments includes
a. only exports, imports, and service transactions
b. the balance on current account, plus all capital transactions and all official transactions and the statistical discrepancy
c. only the official transactions
d. all goods and services produced in a nation's economy during a given year

Q50. A debit item on the U. S. balance of payments is any transaction that
a. results in a loss by U. S. sellers
b. results in a loss by U. S. buyers
c. makes foreigners use up their holdings of U. S. dollars
d. makes U. S. dollars available to foreigners

In the short run, a tighter monetary policy by the U.S. Federal Reserve leads to:

Select one:

a. an increase in the supply of dollars and a dollar depreciation.

b. a decrease in the supply of dollars and a dollar appreciation.

c. an increase in the demand for dollars and a dollar depreciation.

d. a decrease in the demand for dollars and a dollar appreciation.

Which theorem states that exchange rates will adjust until the prices of goods in different countries approximate one another?

Select one:

a. purchasing power parity

b. the law of multiple prices

c. the principle of comparative advantage

d. dollarization

A country's balance of trade is the difference between its:

Select one:

a. nominal and real exchange rates.

b. monetary and fiscal policy.

c. exports and imports.

d. capital inflow and capital outflow.

When a foreign business buys stock in a U.S. company, the U.S. capital account will:

Select one:

a. move in a positive direction.

b. move in a negative direction.

c. remain unchanged.

d. become more volatile.

Saying that the United States is running a large current account deficit is equivalent to saying that:

Select one:

a. exports exceed imports in the United States.

b. the United States is running a large capital account surplus.

c. the balance of payments is negative.

d. the value of the current capital stock in the United States exceeds the value of future capital flows.

10-

An increase in the demand for a country's exports will have what effect on its currency?

Select one:

a. Its value will not change.

b. Its value will increase.

c. Its value will decrease.

d. Its value will depreciate.

11-

When the United States has a current account deficit, the U.S. capital account:

Select one:

a. will have a deficit also.

b. will be balanced.

c. will have a surplus.

d. must be falling.

12-

Which of the following is NOT a way that a country can finance a trade deficit?

Select one:

a. increased borrowing

b. sale of assets

c. decreased exports

d. reduction in cash reserves

13-

A trade deficit occurs when the value of a country's:

Select one:

a. imports exceeds the value of its exports.

b. exports exceeds the value of its imports.

c. inflow of foreign capital exceeds the outflow of domestic capital.

d. outflow of domestic capital exceeds its inflow of foreign capital.

14-

Which of the following is a U.S. current account transaction?

Select one:

a. Selling a computer chip to a resident in Europe.

b. Buying stock shares of a Canadian company.

c. Selling U.S. dollars in exchange for euros.

d. A foreign investor's purchase of a manufacturing plant in the United States.

15-

An exchange rate is:

Select one:

a. a yearly summary of all the economic transactions between residents of one country and residents of the rest of the world.

b. the sum of the balance of trade, net income on capital held abroad, and net transfer payments.

c. the price of one currency in terms of another currency.

d. a currency whose value is not pegged but governments will intervene extensively in the market to keep the value within a certain range.

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ECON102 Chapter Notes - Chapter 12: Exchange Rate, Trade-Weighted Effective Exchange Rate Index, Capital Outflow

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