Deficits in the _______ are referred to as the twin deficits.

government sector and net exports
government and private sectors
capital account and the current account
international borrowing and international trade sectors

The market in which the currency of one country is exchanged for the currency of another country is the ______________.

G7
Chicago Money Exchange
foreign exchange market
foreign currency market

Suppose that $1 Canadian can buy $0.69 U.S. and $1 U.S. can buy $1.45 Canadian. These are examples of __________________.

changes in the prices of net exports
currency appreciation
foreign exchange rates
purchasing power of parity

Between 1982 and 1995, the U.S. dollar _______ against the Japanese yen, and between 1995 and 1999, the U.S. dollar _______ against the Japanese yen.

value changed little; value changed a lot
trended upward; trended downward
depreciated; appreciated
appreciated; depreciated

The U.S. interest rate minus the foreign interest rate is called the ___________________.

foreign interest rate differential
U.S. stock yield differential
U.S. interest rate differential
U.S. bond rate differential

If the exchange rate rises, there is a _______ the demand curve for U.S. dollars, and if the expected future exchange rate falls, there is a _______ the demand curve for U.S. dollars.

movement downward along; rightward shift of
leftward shift; leftward shift of
movement upward along; leftward shift of
movement upward along; movement upward along

The supply curve of U.S. dollars shifts leftward. This could have been influenced by _______________.

an increase in the U.S. exchange rate
a decrease in the U.S. interest rate differential
a rise in the expected future exchange rate
a fall in the expected future exchange rate

Suppose that $1 U.S. costs $1.50 Canadian. If in St. Louis a CD costs $10 and in Montreal it costs $15, then __________________.

Virgin Records will have an incentive to build more stores in North America
Canadians will buy CDs in St. Louis
purchasing power parity exists
Americans will buy CDs in Montreal

If in Chicago the interest rate is 5 percent a year and in Vancouver it is 6 percent a year, ____________________.

the quantity of Canadian dollars purchased will increase
interest rate parity exists, and the U.S. dollar is expected to depreciate
the Canadian dollar is expected to depreciate
interest rate parity does not exist

If the Bank of England wants to depreciate the British pound against the U.S. dollar, it will ________________.

sell foreign exchange
decrease the money supply
sell British pounds
buy British pounds

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