Open Economy: International Trade and Finance

It can worsen the current account balance by increasing imports due to greater domestic income levels.

Productivity gains have no effect on current accounts since they are solely influenced by financial flows.

It can lead to an improvement in the current account balance as exports become more competitive internationally.

Improved productivity can only affect non-current transactions like financial investments and does not touch upon trade balances directly.

The quantity of an international currency that all domestic and foreign sellers are willing and able to sell at various rates of exchange

The willingness of a country to import goods and services

The supply of goods and services in the foreign market

The quantity of money supplied by the central bank in a country

The money supply decreases.

This action leads directly to deflationary pressures within the economy due to reduced liquidity.

The velocity of money decreases proportionally with purchases made.

The money supply increases.

Changes in the interest rates of the country

Changes in the preferences of foreign consumers

Changes in the demand for the country's currency

Changes in the demand for goods and services from the country

Europeans' preference for American goods and services

An increase in Europeans' relative income

Falling price levels in the US

Speculation by experts and investors

Such a policy would prompt an immediate depreciation due to increased imports outstripping exports.

It may lead to an appreciation of the domestic currency due to increased foreign investment attracted by higher interest rates.

It could result in a depreciation of the domestic currency because of higher inflation expectations reducing foreign investment inflows.

Expansionary fiscal policy would have no effect on exchange rates as it only affects domestic aggregate demand and supply.

To facilitate the conversion of one currency into another.

To control inflation within a country.

To regulate international interest rates.

To impose tariffs on imported goods.

The exchange rate becomes unpredictable

The currency depreciates

The exchange rate remains unchanged

The currency appreciates

The currency would appreciate.

The inflation rate has no impact on foreign exchange markets.

The currency would depreciate.

The currency's value remains unchanged.

To solely determine a country's balance of payments position.

To ensure that all countries use a single, global currency for transactions.

To set fixed exchange rates between different countries' currencies.

To facilitate currency conversion for international trade and investment.