If the federal government budget deficit increases,then interest rates will _____,the U.S.dollar will _____,and the foreign trade deficit will _____.
A)increase;depreciate;decrease
B)increase;appreciate;increase
C)increase;depreciate;increase
D)decrease;appreciate;increase
E)decrease;depreciate;decrease

Question

Quizplus · Accepted Answer

When the federal government budget deficit increases, it often borrows more, leading to higher demand for money and thus higher interest rates. Higher interest rates can attract foreign investors looking for better returns, which can lead to an appreciation of the U.S. dollar. An appreciated dollar makes imports cheaper and exports more expensive, potentially increasing the foreign trade deficit.

If the Federal Government Budget Deficit Increases,then Interest Rates Will