A country running a current account deficit over a long time should see its exchange rate:
A)Hold steady
B)Appreciate
C)Depreciate
D)The rate can rise, fall, or hold steady; the current account and the exchange rate are not linked

Question

Quizplus · Accepted Answer

A country running a current account deficit over a long time suggests that it is importing more than it is exporting, leading to a net outflow of currency. The excess supply of the currency in the foreign exchange market will typically lead to a depreciation in the exchange rate. Therefore, the exchange rate is likely to depreciate in this scenario.

A Country Running a Current Account Deficit Over a Long