If foreigners decide that they no longer want to acquire U.S. financial assets, we can expect the value of the dollar to:
A)fall and the trade deficit to fall.
B)fall and the trade deficit to rise.
C)rise and the trade deficit to fall.
D)rise and the trade deficit to rise.

Question

Quizplus · Accepted Answer

If foreigners stop acquiring U.S. financial assets, demand for the dollar decreases, causing its value to fall. A weaker dollar makes U.S. exports cheaper and imports more expensive, reducing the trade deficit.

If Foreigners Decide That They No Longer Want to Acquire