1. Assume that there is another boom in the U.S. stock market. As a result we would expect:
a. An increase in foreign savings, a current account surplus, an increase in the supply of dollars and an appreciation of the dollar.
b. A decrease in domestic savings, a capital account deficit as domestic savings moves abroad, an increase in the supply of dollars and an appreciation of the dollar.
c. An increase in foreign savings, a capital account surplus, an increase in the demand for the dollar and an appreciation of the dollar.
d. An increase in foreign savings, a capital account surplus, a decrease in the demand for the dollar and the dollar will depreciate.
2. Assume there is an increase in domestic economic growth in the United States. As a result we would expect:
a. The dollar to depreciate, the prices of imports will fall and export prices will increase. As a result, NX will decrease.
b. No change in the value of the dollar or NX.
c. The dollar to appreciate, the prices of imports will fall and export prices will decrease. As a result, NX will increase.
d. The dollar to depreciate, the prices of imports will increase and export prices will fall. As a result, NX will increase.
3. If there is an increase in domestic economic growth and consumer incomes (holding the inflation rate constant), we can expect:
a. An increase in the supply of dollars in the foreign exchange market and the dollar will appreciate.
b. An increase in the supply of dollars in the foreign exchange market and the dollar will depreciate.
c. A decrease in the supply of dollars in the foreign exchange market and the dollar will appreciate.
d. A decrease in the supply of dollars in the foreign exchange market and the dollar will depreciate.
4. An expansionary monetary policy by the Fed would tend to:
a. Lower the U.S. inflation rate (initially holding exchange rates constant) make exports more expensive, make imports cheaper, and as a result lower the value of the dollar.
b. Lower the U.S. inflation rate, (initially holding exchange rates constant) make exports cheaper, make imports more expensive, and as a result raise the value of the dollar.
c. Raise the U.S. inflation rate, (initially holding exchange rates constant) make exports cheaper, make imports more expensive, and as a result raise the value of the dollar.
d. Raise the U.S. inflation rate (initially holding exchange rates constant) make exports more expensive, make imports cheaper, and as a result lower the value of the dollar.