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

Question

Quizplus · Accepted Answer

A decrease in the U.S. government budget deficit can lead to a decrease in the real exchange rate by reducing the demand for U.S. dollars, as less borrowing may lead to lower interest rates and less foreign investment in U.S. assets.

Which of the Following Can Explain a Decrease in the U.S.real