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Suppose the USA and EU are trading, and currencies must be exchanged as goods/services are imported and exported between the two regions. The $USD is the currency of the USA, and the €Euro is the currency of the EU.
a. Are the following statements correct or incorrect? Why or why not?
“If the USA is exporting its goods to the EU, these exports from the USA to the EU create a demand for €Euros in the Currency Exchange Market for €Euros.”
“If the USA is importing goods from the EU, these imports to the USA from the EU create a supply of $USD in the Currency Exchange Market for $USD’s.”
“If the EU is importing goods from the USA, these imports to the EU from the USA create a demand for $USD in the Currency Exchange Market for $USD’s.”
Throughout your answer to any of these other questions, use graphs as needed (all axes and functions completely labeled) to accompany your written analyses.
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