What is the source of the data discussed in this article? What types of investments does the article refer to? Assuming that the behavior of this type of investment is typical of investment in general, what can you conclude about the volume of foreign investment in the U.S. in 1994? Do you think this pattern is good or bad for the U.S. economy? Why?

Note that this article was published on the same day as the preceding one.    What is the source of the data? What seems to have been happening to the U.S. trade balance during the 1994? Is this consistent with the pattern of foreign investment noted in question 1? Do you think this behavior of the trade deficit is good or bad for the U.S. economy? Why?

(Note the date of this article and the fact that the situation in Thailand has since changed dramatically.) What are some of the causes of trade deficits? Are trade deficits necessarily bad for the economy? Why or why not? (The additional reading "Figures to Fret About" contains further discussion.)

This article discusses the effects of international capital flows on exchange rates. What are some possible reasons for an outflow of capital? What are some of the consequences?

This article discusses the theory of purchasing power parity (PPP). What does this theory say? According to the numbers reported in the article, did exchange rates in April 1998 line up according to the predictions of PPP? If not, which currencies seemed to be most overvalued relative to the dollar? Most undervalued? (As a matter of interest, you might want to compare the situation in 1998 with that a year earlier, before the depreciation of several East Asian currencies. See the additional reading, also called "Big MacCurrencies", dated April 1997.) What does such overvaluation or undervaluation mean? Why might such apparent overvaluation or undervaluation persist when measured in terms of a single item like a Big Mac? Why might there be persistent overvaluation or undervaluation even in terms of a broader basket of goods and services?

This article reports that these auto makers raised U.S. prices on cars built in Japan "because of the strong yen." Why would a strong yen tend to lead to this result? Do these price adjustments constitute movements toward or away from the predictions of PPP? The article also notes that Honda increased the price on cars built in the United States? Could the strong yen have been responsible for this decision? Why or why not?