One unpleasant cure for the U.S.trade deficit of the 1990s would be for foreigners who hold U.S.financial assets to demand
A)lower interest rates to stimulate U.S.growth rates.
B)higher interest rates and generate a recession in the United States.
C)higher interest rates and generate an appreciation of the dollar.
D)lower interest rates and generate a depreciation of the dollar.

Question

Quizplus · Accepted Answer

If foreigners who hold U.S. financial assets demand higher interest rates, this will likely cause the value of the dollar to appreciate and make U.S. exports more expensive, leading to a larger trade deficit. Additionally, higher interest rates could slow down the U.S. economy and even cause a recession, further exacerbating the trade deficit.

One Unpleasant Cure for the U