“Changes in exchange rates will automatically direct a country toa current-account balance under a flexible exchange rate system. “Is this statement true or false?
Several members of Congress have been highly critical of Japan and China because U.S. imports from these countries have persistently been substantially greater than our exports to them.
a. Under a flexible exchange rate system, is there any reason to expect that the imports from a given country will tend to equal the exports to that country?
b. Can you think of any reason why the United States might persistently run a trade deficit with these countries?