True or False? “U.S. exports create a demand for foreign currencies; foreign imports of U.S. goods generate supplies of foreign currencies.” Explain. Would a decline in U.S. consumer income or a weakening of U.S. preferences for foreign products cause the dollar to depreciate or appreciate? Other things equal, what would be the effects of that depreciation or appreciation on U.S. exports and imports?
5. If the European euro were to decline in value (depreciate) in the foreign exchange market, would it be easier or harder for the French to sell their wine in the United States? Suppose you were planning a trip to Paris. How would the depreciation of the euro change the dollar price of this trip?
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