If a country's budget deficit decreases,then the exchange rate
A)rises,which raises net exports.
B)rises,which reduces net exports.
C)falls,which raises net exports.
D)falls,which reduces net exports.

Question

Quizplus · Accepted Answer

A decrease in budget deficit would mean that the government is spending less, which would lead to a reduction in the demand for foreign currency. This would lead to a fall in the exchange rate, which would make exports cheaper and more competitive, leading to a rise in net exports.

If a Country's Budget Deficit Decreases,then the Exchange Rate