3. (4 pts) Exchange Rate Effect on Trade Balance. (4 pts) According to the book, a floating exchange rate could correct any international trade imbalances between two countries, however the book suggests several reasons why exchange rates may not correct a Balance of Trade deficit. List and explain two of the reasons stated in the book. 4. Currency Effects. (4 pts) When South Korea's export growth stalled, some South Korean firms suggested that South Korea's primary export problem was the weakness in the Japanese yen. Assuming South Korea and Japan produce many similar goods, how would you interpret this statement? 5) International Investments. (4 pts) U.S.-based MNCs commonly invest in foreign securities. a. Assume that the US dollar is presently strong (say 25 Peso per dollar) versus the Peso but is expected to weaken over time (say 20 Pesos per dollar in 1 year). Explain how these expectations affect the tendency of U.S. investors to invest in Peso denominated securities? 6) (6 pts) According to the article link "iphone article related to trade deficits" why does the author think the reported US balance of trade data may be misleading. 7) (6 pts) According the the article link "US Trade deficit with China" link, the author claims that most economist agree that China's competitive pricing is a result of two factors: List and explain the two factors mentioned in the article