1. Analysis. Suppose that U.S. imports currently equal U.S. exports. Explain how a fall in the value of the dollar in comparison to other currencies can affect the current U.S. balance of trade.
2. Cause and Effect. Over a six-month period you notice that the dollar appreciates in value compared to other currencies and that the U.S. balance of trade goes from zero to – $30 billion. You suspect some relationship exists between the change in the value of the dollar and the U.S. balance of trade. Did the change in the balance of trade cause the change in the value of the dollar, or did the change in the value of the dollar cause the change in the balance of trade? Explain your answer.
