Question: KEY QUESTION True or False? U.S. exports create a demand for foreign currencies; foreign imports of U.S. goods create a supply of foreign currencies. Explain.

KEY QUESTION True or False? “U.S. exports create a demand for foreign currencies; foreign imports of U.S. goods create a supply of foreign currencies.” Explain. Would a decline in U.S. consumer income or a weakening of U.S. preferences for foreign products cause the dollar to depreciate or to appreciate? Other things equal, what would be the effects of that depreciation or appreciation on U.S. exports and imports?

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