Macroeconomics Exam Unit 6 International Economics

  D$     demand for dollar denominated financial assets  D$         r in county X r in the U.S., relative to country X capital inflow to country X OR capital outflow from the U.S. demand for dollar denominated financial assets appreciation of the US$ relative to the X$ from (e1 – e2)      r in county X r in the U.S., relative to country X capital outflow from country X OR capital inflow to the U.S.   [ UNIT VI ] International Economics depreciation of the US$ relative to the X$ from (e1 – e2)   $ denominated goods become relatively more expensive » D$ [truth » ( denominated goods become relatively less expensive) $ denominated goods become relatively less expensive » D$ [truth » ( denominated goods become relatively more expensive) $ denominated goods become relatively more expensive » D$ [truth » ( denominated goods become relatively less expensive) $ denominated goods become relatively less expensive » D$ [truth » ( denominated goods become relatively more expensive)              M X S$ ]   PL in U.S. ($) M X S$ ]   PL in U.S. ($) M X S$ ]   Depreciation of the $ relative to the from e1 –e2 X S$ ]   Appreciation of the $ relative to the from e1 –e2  [Typical International Goods (Current Account) Question]: [HINT] If forced to use S$, it should respond to ΔrGDP. [TRUTH] Goods questions are S$. M [Flow of Goods and Services]: EXPLANATION PL: The increase in price level makes dollar denominated goods relatively more expensive. Appreciation here: The appreciated $ makes dollar denominated goods relatively more expensive. PL in other country: The decrease in price level makes denominated goods relatively less expensive. Depreciation of : The depreciated makes denominated goods relatively less expensive. PL: The decrease in price level makes dollar denominated goods relatively less expensive. Depreciation here: The depreciated $ makes dollar denominated goods relatively less expensive. PL in other country: The increase in price level makes denominated goods relatively more expensive. Appreciation of : The appreciated makes denominated goods relatively more expensive. EFFECT   Decrease in U.S. exports ( X) Increase in U.S. imports ( M)                       Increase in U.S. exports ( X) Decrease in U.S. imports ( M)         PL in the U.S – country you are looking at Depreciation of $ – value of the currency you are looking at PL in – the other country Appreciation of – value of the other country’s currency.                            PL in the U.S – country you are looking at Appreciation of $ – value of the currency you are looking at PL in – the other country Depreciation of – value of the other country’s currency        CAUSE A Look-Ahead to Other International Consequences: [NOTICE] Your answer is different depending on whether it is a goods or financial assets question. Appreciation of the $ relative to the from e1 – e2 demand for $ denominated financial assets in order to yield a higher return D$ depreciation of the $ relative to the from e 1 - e2 demand for $ denominated financial assets in order to yield a higher return D$ depreciation of the $ relative to the from e 1 - e2 demand for $ denominated financial assets in order to yield a higher return D$ depreciation of the $ relative to the from e 1 - e2 demand for $ denominated financial assets in order to yield a higher return D$ depreciation of the $ relative to the from e 1 - e2 demand for $ denominated financial assets in order to yield a higher return D$ depreciation of the $ relative to the from e 1 - e2 demand for $ denominated financial assets in order to yield a higher return D$ depreciation of the $ relative to the from e 1 - e2 demand for $ denominated financial assets in order to yield a higher return D$ appreciation of the $ relative to the from e 1 - e2 demand for $ denominated financial assets in order to yield a higher return D$ appreciation of the $ relative to the from e 1 - e2 demand for $ denominated financial assets in order to yield a higher return D$ appreciation of the $ relative to the from e 1 - e2                                   appreciation of the $ relative to the from e 1 - e2  demand for $ denominated financial assets in order to yield a higher return D$  Appreciation of the $ relative to the from e1 – e2 appreciation of the $ relative to the from e 1 - e2  Appreciation of the $ relative to the from e1 – e2 demand for $ denominated financial assets in order to yield a higher return D$       $ denominated goods become relatively less expensive D$ (truth S$)  reserve requirement Depreciation of the $ relative to the from e1 – e2 appreciation of the $ relative to the from e 1 - e2      $ denominated goods become relatively less expensive D$ (truth S$)   discount rate    $ denominated goods become relatively less expensive D$ (truth S$) Depreciation of the $ relative to the from e1 – e2 Value of the $ demand for $ denominated financial assets in order to yield a higher return D$  $ denominated goods become relatively more expensive D$ (truth S$)    OMO sale     $ denominated goods become relatively more expensive D$ (truth S$) Depreciation of the $ relative to the from e1 – e2 Financial Assets/Capital Account    $ denominated goods become relatively more expensive D$ (truth S$)     reserve requirement  EXPANSIONARY discount rate  CONTRACTIONARY MONETARY POLICY OMO buy Appreciation of the $ relative to the from e1 – e2     $ denominated goods become relatively less expensive D$ (truth S$)   Tcorporate Appreciation of the $ relative to the from e1 – e2      $ denominated goods become relatively less expensive D$ (truth S$)   Tincome Appreciation of the $ relative to the from e1 – e2   $ denominated goods become relatively less expensive D$ (truth S$)   G Depreciation of the $ relative to the from e1 – e2       $ denominated goods become relatively more expensive D$ (truth S$) Depreciation of the $ relative to the from e1 – e2     $ denominated goods become relatively more expensive D$ (truth S$)   Tincome Depreciation of the $ relative to the from e1 – e2  $ denominated goods become relatively more expensive D$ (truth S$) r   Value of the $ Goods/Current Account   EXPANSIONARY G Tcorporate  CONTRACTIONARY FISCAL POLICY PL