if trade between the u.s. and europe is perfectly balanced, then exchange rates
ID: 1099282 • Letter: I
Question
if trade between the u.s. and europe is perfectly balanced, then exchange rates change so that the euro is cheaper for americans to buy, we could expect to see:
A, U.S. exports to europe will ______, and u.s imports from europe will _______.
B. the U.S. would begin to run a trade _______ and a net capital _______.
C. these changes in trade will cause U.S. consumption to ________ and net exports to ______.
D. savings will be ________ than domestic investment.
The fill in the blank options are: deficit, surplus, inflow, outflow, less, greater, increase, not change, and decrease.
Explanation / Answer
A, U.S. exports to europe will decrease, and u.s imports from europe will increase.
B. the U.S. would begin to run a trade deficit and a net capital surplus.
C. these changes in trade will cause U.S. consumption to decrease and net exports to decrease.
D. savings will be lower than domestic investment.
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