Which of the following would cause the real exchange rate of the U.S.dollar to depreciate?
A)the U.S.government budget deficit decreases
B)capital flight from foreign countries
C)the U.S.imposes import quotas
D)None of the above is correct.

Question

Quizplus · Accepted Answer

A decrease in the U.S. government budget deficit can lead to lower interest rates, reducing foreign investment demand for U.S. dollars, causing the real exchange rate to depreciate.

Which of the Following Would Cause the Real Exchange Rate