1. If interest rates fall, will capital stock increase or decrease? Why?

2. What 4 supply factors make it possible for a country to experience economic growth?

3. If a country experiences economic growth, which 2 curves will shift to the right?

4. The price level in country A rises relative to country B's price level. What will happen to the demand for country A's currency? What will happen to the supply of country B's currency?

5. If demand for a currency decreases, what happens to the supply of the other country's currency?

6. The price level in the U.S. stays the same but the price level in Mexico decreases. How will the demand for the peso and the supply of the dollar be affected in the foreign exchange market?

7. If the demand for the dollar increases or the supply of the dollar decreases, the value of the dollar will do what?

8. If the demand for the pound decreases or the supply of the pound increases, the value of the pound will do what?

9. If the dollar appreciates relative to the euro, what happens to the U.S. exports to Europe and U.S. imports from Europe?

10. If the dollar depreciates relative to the yen, what happens to U.S. exports to Japan and U.S. imports from Japan?

11. If net exports increase, what happens to a country's current account balance?

12. The current account balance is $45 billion and imports increase by $10 billion. What will be the new balance in the financial account?

13. The U.S. exports $50 million worth of oil to Brazil.

a. what happens to Brazilian demand for the dollar?

b. what happens to the U.S.'s current account balance? Brazil's current account balance?

c. what happens to the U.S.'s financial account balance?

14. Interest rates in the U.S. increase relative to interest rates in the U.K. How will each of the following be affected?

a. the U.K.'s demand for U.S. financial assets (bonds, savings accounts, etc.)

b. the U.K.'s demand for the U.S. dollar

c. the supply of the pound in the foreign exchange market

d. the value of the dollar

e. the value of the pound