Suppose a decline in U.S. income causes Americans to decrease their demand for all normal goods, including those produced in Europe. How will this change affect the foreign exchange market?
a. A decrease in U.S. income will increase the U.S. demand for foreign exchange, thus increasing the dollar-per-euro exchange rate, making European goods more expensive to U.S. residents.
b. A decrease in U.S. income will decrease the U.S. demand for foreign exchange, thus decreasing the dollar-per-euro exchange rate, making European goods cheaper to U.S. residents.
c. A decrease in U.S. income will decrease the U.S. supply of foreign exchange, thus increasing the dollar-per-euro exchange rate, making European goods cheaper to U.S. residents.
d. A decrease in U.S. income will increase the U.S. supply of foreign exchange, thus increasing the dollar-per-euro exchange rate, making European goods expensive to U.S. residents.
b
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The natural rate of unemployment:
A) is a constant. B) is the average of the unemployment rate in a country over time. C) is determined by adding the unemployment rates in all countries and then dividing it by the number of countries. D) is always lesser than the level of cyclical unemployment in an economy.
The part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country is the
A) capital account. B) current account. C) financial account. D) statistical discrepancy account.