Problem
A. Define balance of trade and determine if a country has a trade deficit or trade surplus.
B. Describe the U.S. statistics regarding the U.S. balance of trade over time.
C. Define balance of payments and give the mathematical expression for the balance of payments.
D. Differentiate between the current account and the capital account.
E. Determine how a given transaction will affect a nations balance of payments.
F. Explain the economic view on trade deficits and why we do not need protectionist policies to eliminate them.
G. Use supply and demand to explain changes in currency exchange rates.
H. Determine if a currency is appreciating or depreciating relative to another currency.
I. Convert one currency into another using current exchange rates.
J. Explain the Purchasing Power Parity Theorem.
K. Explain the Law of One Price.
L. Compare floating exchange rate policies to fix or pegged exchange rate policies.