Which of the following could explain a decrease in the U.S. real exchange rate?
A)the U.S. government budget deficit rises
B)the U.S. impose import quotas
C)the default risk of U.S. assets rise
D)All of the above are correct.

Question

Quizplus · Accepted Answer

An increase in default risk of U.S. assets would lead to a decrease in demand for these assets, which would result in a decrease in the U.S. real exchange rate. Option C would be the best choice among the given options. Options A and B may affect the U.S. economy in various ways, but they would not directly impact the real exchange rate. Therefore, option D is not the best choice.

Which of the Following Could Explain a Decrease in the U.S