Most countries export and import goods, not services.
32. Relatively high interest rates in the United States contributes to a strong U.S. dollar (less
dollars per another currency) and this may lead to a deficit on the U.S. current account.
33. Asymmetric information refers to differences in information possessed by parties
engaged in trade.
34. Micromania has recently experienced a slowdown in its labor productivity growth
relative to its international trading partners. Micromania can expect, if this trend
continues, the currency of its trading partners to be devalued.
35. Foreign exchange markets are markets wherein the goods of international trading partners
36. If a country experiences deflation, its currency will increase in value relative to its trading
partners, ceteris paribus.
37. Contrary to the product market, in the currency market demand is positively sloped
reflecting the greater speculative yield potential from high priced currencies.
38. The development of instantaneous electronic communication and transaction markets has
increased the potential for market arbitrage.
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