Analyze the data on inflation rates, interest rates, and growth rate forecasts in Table to determine what the likely near-term trend movement of the U.S. dollar will be. Analyze how each of the previously mentioned factors will affect the euro-dollar rate.

ELABORATE THE DEBATE ON NAFTA
PROS:
1. Trade between Mexico, Canada, and U.S. has tripled to $1 trillion.
2. Food exports to Mexico have grown at 8 percent annually.
3. Mexico has increased its exports and foreign direct investment.
4. U.S. manufacturing has become more cost competitive using components and subassemblies from Canada and Mexico.
CONS:
1. 100,000s of U.S. jobs have shifted below the border.
2. Wage concessions have been forced upon those U.S. workers who remain employed in industries that outsource to Mexico.
3. The United States has run a persistent trade deficit with Mexico andCanada.

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TRANSACTION DETERMINANTS OF LONG-TERM EXCHANGE RATE TRENDS GERMANY/EURO AREA UNITED STATES JAPAN CHINA REAL REAL GDP REAL REAL GDP REAL REAL GDP REAL REAL GDP PPI 6.7 14.1 6.8 2.0 -0.9 0.8 2.4 PPI PPI 2.0 1.0 I.8 0.5 3.9 PPI 1995 27 1996 1997 1998 1999 1.92.0 2.7 0.4 3.2 14 14 -0.6 10.5 9.6 8.8 7.8 2.5 1.0 2.6 0.5 0.7 5.8 4.0 0.0 0.5 0.9 0.8 1.0 0.34 | -0.5 0.03 0.33 2.0 9.0 0.0 0.6 4.2 -0.8 0.3 1.82.9 4.0 2.0 1.0 0.8 1.8 1.4 3.0 1.9 -0.1 2.9 0.4 0.1 I.8 -0.9 4.6 2.9 2.7 2.3 8.0 -0.7 2001 2002 2003 2004 42 08 0.9 2.0 7.5 0.1 1.0 0.3 0.0 0.0 0.9 1.6 -0.9 3.2 3.6 4.9 3.2 2.7 9.5 1.5 1.4 9.5 0.7 7.5 TE 2.8 2.1 2.4 -0.7 3.0 2.0 0.9 11.6 0607 13.0 0.7 0.9 9.0 -3.1 4.9