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Consider the case of a balance-of-trade deficit in the United States, along with a floating exchange rate. A balance-of-trade deficit implies that the value of
Consider the case of a balance-of-trade deficit in the United States, along with a floating exchange rate. A balance-of-trade deficit implies that the value of imports is greater than the value of exports. As the supply of dollars increases (in exchange for foreign currency to purchase imports), the value of the dollar decreases . This would lead to increased demand for American products in foreign countries
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