Question

1. When investors expect a country’s currency to strengthen in the future this is likely to result in _________________.

Select the correct answer below:

a. immediate appreciation of that currency

b. immediate depreciation of that currency

c. slow, steady appreciation of that currency

d. slow, steady depreciation of that currency

2. Which of the following is an example of a cyclically unemployed person

Select the correct answer below:

a. Mary quit her job to look for a better paying position with a different company

b. Rohit's company outsourced his position to another country and he was laid off. He needs to train to move into a different type of role.

c. Ron has decided to quit his job to become a stay-at-home dad.

d. Mae was laid off due to decrease in orders for her company's products. The economy is slowing down.

3. Assume that the level of domestic investment in a country rises while the level of private and public saving remains unchanged. In this case, the trade deficit would __________

Select the correct answer below:

a. increase

b. decline

4. One reason to demand a currency on the foreign exchange market is __________________________.

Select the correct answer below:

a. the belief that the currency's value is about to decline

b. the belief that the currency's value is about to increase

5. If a national economy runs a trade surplus, the trade sector will involve a(n) ______________ of financial capital.

Select the correct answer below:

a. inflow

b. outflow

c. shortage

d. balance

6. Suppose an economy has a trade surplus of $50 billion, private domestic savings of $500 billion, a government deficit of $120 billion, and private domestic investment of $570 billion. If the trade surplus decrease to $0, then all else equal by how many billions of dollars must private domestic investment have to change? Use a negative sign in your answer if there must be a decrease in private domestic investment.

Recall the savings investment formula: S+(M–X)=I+(G−T)

Provide your answer below:

Answer 1

1. When investors expect a country’s currency to strengthen in the future, the demand for the currency in the exchange market increases. This is likely to result in a sudden appreciation of the value of the currency as the spike in demand causes its equilibrium exchange rate to increases

Ans: a. immediate appreciation of that currency

2.

a. Mary quit her job to look for a better paying position with a different company - Frictional unemployment

b. Rohit's company outsourced his position to another country and he was laid off. He needs to train to move into a different type of role - Structural unemployment

c. Ron has decided to quit his job to become a stay-at-home dad. - Voluntary unemployment

- not considered as unemployed by the BLS as Ron is not a part of labor force anymore

d. Mae was laid off due to decrease in orders for her company's products. The economy is slowing down. - cyclical unemployment

Ans: d

3. When the domestic investment rises without a change in private and public savings, it means that the investment increase was funded by the external sector, Therefore, the trade deficit would increase.

Ans: a

4. When it is speculated that a country's currency is about to appreciate, then the demand for that currency in the exchange market increases as people see an opportunity of arbitrage from the appreciation of the currency.

Ans: b