Lectures 27/28
Lecture 28
Handout
Handout
Handout
100
What is the current US trade balance, a deficit or a surplus?
Deficit
100
During a recession the trade deficit tends to grow or shrink?
Shrink, imports down
100
Civil unrest; value of a currency up or down?
Down, investors move funds out of the country
100
U.S. economy expanding rapidly will have what effect?
Income up a lot which means imports up a lot, Supply $ Up and Val $ Down
100
The FED responds to crises by trying to make the U.S. assets less attractive, this has what effect?
Fed lowers the interest rates, Dem $ Down, Supply $ Up and Val $ Down
200
What is the capital account balance since the early 1980's, a deficit or a surplus?
Surplus
200
If the US money supply grows faster than the Euro area money supply, is the dollar up or down versus the Euro?
$ down – US prices up faster than Euro prices
200
If most currency traders expect the $ value to go down, the value likely will go up or down?
Down, (S>D)
200
The FED increases the money supply rapidly, what effect will this have?
Inflation imports are up and exports are down, Dem $ Down, Supply $ Up and Val $ Down
200
The U.S. economy sinks into a recession, this has what effect?
Income falls which means imports fall, Supply $ Down and Val $ Up
300
Are payments balanced or unbalanced?
Balanced
300
If you want the currency to rise in value, which way do you push interest rates?
Up - draws foreign funds in. Demi $ up (foreign demand)
300
A decrease in foreign investment into the U.S. will have what kind of effect?
Less foreign savings flow in, which means Dem $ down and Value $ down
300
Currency traders expect val $ to rise, this has what effect?
Most buys $'s, Dem $ Up, Supply $ Down and Val $ Up
300
World economic growth increases demand for U.S. goods, this has what effect?
Exports Up, Dem $ Up and Val $ Up
400
Strong economic growth tends to send the value of a currency up or down?
Up
400
Tight money; dollar up or down?
Up
400
The FED raises interest rates will have what effect?
Higher rates of return to foreigners, Dem $ Up, Supply Down and Val $ Up
400
Holder's of dollars decide they prefer Euros, this has what effect?
Sell $'s and buy Euros, Dem $ Down, Supply $ Up and Val $ Down
400
Production commodity import costs rise, this has what effect?
import costs up, Supply $ Up and Val $ Down
500
During an expansion the trade deficit tends to grow or shrink?
Grow, imports Up
500
Easy money; dollar up or down?
Down
500
U.S. productivity rising rapidly will have what effect?
U.S. stuff more attractive, Dem $ Up, Supply Down and Val $ Up
500
Currency crises abroad send world savers to safety of U.S. assets, this has what effect?
Foreign savings flow to U.S., Dem $ Up, Supply $ Down and Val $ Up
500
World economic recession, this has what effect? What about U.S. import restrictions?
Exports are down, Dem $ Down and Val $ Down. Imports are down, Supply $ Down and Val $ Up.
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