An increase in the current account deficit will place ____ pressure on the home currency value, other things equal.
A) upward
B) downward
C) no
D) upward or downward (depending on the size of the deficit)

Question

Quizplus · Accepted Answer

An increase in the current account deficit means that the country is importing more goods and services than it is exporting, which leads to an outflow of currency from the country. This leads to an excess supply of currency in the foreign exchange market, which will put downward pressure on the value of the home currency.

An Increase in the Current Account Deficit Will Place ____