Chapter 33 — Exercises

A1. The U.S. imports more than it exports. Where does the money come from to pay for the excess imports? A2. If the dollar appreciates 10% against the euro, what happens to the price of U.S. exports in Europe? A3. State the impossible trinity. Which two does the U.S. choose? Which does it give up? A4. Why did the Asian financial crisis happen? Apply the impossible trinity to Thailand. A5. The eurozone has a single currency but no fiscal union. Why is this a problem? A6. China has historically maintained a semi-fixed exchange rate. Which element of the trinity did it sacrifice? A7. Look up the dollar-euro exchange rate on FRED (DEXUSEU). How has it changed since 2000? A8. "A strong dollar is good for America." Evaluate. Who benefits and who is hurt by a strong dollar?

Selected answers in appendices/answers-to-selected.md.