Using the simple model of Table 15.12, explain why there is a balance of payments equilibrium when
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Using the simple model of Table 15.12, explain why there is a balance of payments equilibrium when export spending equals import spending. What is the more general condition for equilibrium in the balance of payments?
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TABLE 15.2 (updated) Effect of Dollar Appreciation and Depreciation on U.S. Exports and Imports R=EURO/S DOMESTIC PRICE JAN 09: R=0.76 JUNE 09: R=0.71 EFFECT ON EXPORTS (X) AND IMPORTS (M) $1,000 U.S. exports: Televisions U.S. imports: European cars Euro 25,000 JAN 08: R = 0.68 JAN 09: R 0.76 $1,000 U.S. exports: Televisions U.S. imports: European cars Euro 25,000
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