Define official settlements account and U.S. official reserves. Discuss the differences between the two terms
What will be an ideal response?
The official settlements account is the record of the change in a country's official reserves. U.S. official reserves are the U.S. government's holdings of foreign currency. If the U.S. official reserves increases, the official settlements account balance is negative. The reason the official settlements account decreases is that holding foreign money is similar to investing abroad insofar as both buying foreign money and buying foreign assets (that is, investing abroad) use (rather than acquire) U.S. dollars.
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Consider the following two cases. In the first, a U.S. firm purchases 18% of a foreign firm. In the second, a U.S. firm builds a new production facility in a foreign country
Both are ________, with the first referred to as ________ and the second as ________. A) foreign direct investment (FDI) outflows; greenfield; brownfield B) foreign direct investment (FDI) inflows; greenfield; brownfield C) foreign direct investment (FDI) outflows; brownfield; greenfield D) foreign direct investment (FDI) inflows; brownfield; greenfield E) foreign direct investment (FDI); inflows; outflows
A temporary decline in productivity would cause the IS curve to
A) shift up and to the right. B) shift down and to the left. C) remain unchanged. D) shift up and to the right only if people face borrowing constraints.
Which of the following is NOT an accurate description of open market operations prior to 2008?
A) It was used to affect the market for bank reserves. B) It was used to control the federal funds rate. C) It involved buying and selling of short-term Treasury securities. D) It involved buying and selling long-term securities.
The nominal, effective exchange rate is the:
a. Nominal, effective exchange rate adjusted for a nation's price level relative to many foreign countries' prices. b. Value of one currency in terms of another currency. c. Weighted-average value of a currency relative to many foreign currencies. d. Nominal, bilateral exchange rate adjusted for the international price levels of the two countries.