Which of the following steps does not belong to the sequence of events reflecting the financing of a large government budget deficit?
A) The U.S. Treasury sells securities.
B) The sale of securities drives up interest rates.
C) Attracted by the high interest rates, foreigners purchase dollars in order to invest in the United States.
D) The greater demand for the dollar increases its value relative to other currencies.
E) The rising value of the dollar leads to increased U.S. exports and reduced U.S. imports.

Question

Quizplus · Accepted Answer

The sequence of events described is a common scenario where a large government budget deficit is financed through the sale of securities, which attracts foreign investments and drives up the value of the dollar. However, the last step in the sequence, namely "The rising value of the dollar leads to increased U.S. exports and reduced U.S. imports" does not belong, as it describes the potential economic effects of a strong dollar, rather than the steps involved in financing a deficit.

Which of the Following Steps Does Not Belong to the Sequence