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1. Digital Study Guide, written by William Walstad
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After reading this chapter, you should be able to:

1. Explain how currencies of different nations are exchanged when international transactions take place.
2. Analyze the balance sheet the United States uses to account for the international payments it makes and receives.
3. Discuss how exchange rates are determined in currency markets.
4. Describe the difference between flexible exchange rates and fixed exchange rates.
5. Identify the causes and consequences of recent record-high U.S. trade deficits.