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8 Cards in this Set
- Front
- Back
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According to the “J curve” a depreciation of the dollar will initially
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Decrease the trade balance
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Assume C = 500, I = 100, G = 200, Exports = 400, & Imports = 320. The domestic demand for all goods (gross national expenditure) is
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800
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Assume the home price level, the foreign price level, home disposable income and foreign disposable income are held constant. We normally assume an increase in the exchange rate (the home currency price of the foreign currency) will
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Increase the trade balance
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Assume the relative price of foreign goods and foreign disposable income are held constant. A decrease in home disposable income will
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Increase the trade balance
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Assume the relative price of foreign goods and home disposable income are held constant. A decrease in foreign disposable income will
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Decrease the trade balance
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Consider our simple algebraic model of the goods market in an open economy (where the money market and the FX market are ignored). A decrease in the value of the foreign currency will
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Decrease output and decrease the trade balance
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Consider our simple algebraic model of the goods market in an open economy (where the money market and the FX market are ignored). An increase in domestic demand will
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Increase output and decrease the trade balance
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Consider our simple algebraic model of the goods market in an open economy (where the money market and the FX market are ignored). An increase in international demand (the intercept of the trade balance equation) will
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A. Increase output and increase the trade balance
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