With a deficit in our balance of payments, there is an excess __________ dollars in the foreign exchange market, causing the dollar to __________.
A) demand for; appreciate
B) demand for; depreciate
C) supply of; appreciate
D) supply of; depreciate

Question

Quizplus · Accepted Answer

A deficit in the balance of payments means that we are importing more goods and services than we are exporting. This results in an excess supply of dollars in the foreign exchange market, which ultimately causes the value of the dollar to depreciate. Therefore, option D is the best choice.

With a Deficit in Our Balance of Payments, There Is