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Problem 3. Figures 1-2 show the net exports and the real exchange rate of the United States since 1996. Choose an aspect of the movements

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Problem 3. Figures 1-2 show the net exports and the real exchange rate of the United States since 1996. Choose an aspect of the movements in these two variables that interests you the most. Using the theory of the open economy, discuss what may be the underlying causes of those movements. (Maximum 200 words) Figure 1. US Net Exports as a Percent of GDP, 1996-Present FRED - Shares of gross domestic product: Net exports of goods and services Percent 6 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2016 2020 Shaded areas indicate U.S. recessions. Source: U.S. Bureau of Economic Analysis fred.stlouisfed.org Figure 2. US Real Exchange Rate, 1996-Present FRED - Real Broad Effective Exchange Rate for United States 130 125 120 115 MM Index 2010-100 110 105 100 1998 2000 2002 2004 2006 2006 2010 2012 2014 2016 2018 2020 Shaded areas indicate U.S. recessions. Source: Bank for International Settlements fred.stlouisfed.org

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