True or False:
1. U.S. consumers must first exchange U.S. dollars for a foreign seller’s currency in order to pay for imported goods.
2. The exchange rate can be expressed either as the number of units of currency A per unit of currency B or as its reciprocal, the number of units of currency B per unit of currency A.
3. The more foreign goods that are demanded, the more of that foreign currency will be needed to pay for those goods, which will tend to push down the exchange value of that currency relative to other currencies.
4. The supply of foreign currency is provided by foreigners who want to buy the exports of a particular nation.
5. As the price of the euro falls relative to the dollar, European products become relatively more inexpensive to U.S. consumers, who therefore buy more European goods.
6. As the value of the euro increases relative to the dollar, American products become relatively more inexpensive to European buyers and increase the quantity of dollars they will demand. Europeans will, therefore, increase the quantity of euros supplied to the United States by buying more U.S. products.
7. If the dollar price of euros is lower than the equilibrium price, a surplus of euros will result, and competition among euro sellers will push the price of euros down toward equilibrium.
8. Any force that shifts either the demand for or supply of a currency will shift the equilibrium in the foreign exchange market, leading to a new exchange rate.