Answer the following problems.

problem 1) Describe how U.S. exports create the demand for dollars and a supply of foreign exchange; and how U.S. imports create the demand for foreign exchange and a supply of dollars.

problem 2) Describe and identify the different components of balance of payments.

problem 3) Identify trade and balance of payments deficits or surpluses when given suitable data.

problem 4) Describe how a nation finances a “deficit” and what it does with the “surplus.”

problem 5) Describe how exchange rates are determined in the flexible system.

problem 6) Describe how flexible exchange rates eliminate balance of payments disequilibria.

problem 7) prepare down five determinants of exchange rates.

problem 8) prepare down three disadvantages of flexible exchange rates.

problem 9) prepare down three ways a nation could control exchange rates under the fixed rate system.

problem 10) describe a system based on gold standard, the Bretton Woods system, and a managed float exchange rate system.

problem 11) describe two effects of trade deficit.