Which one of the following would cause an appreciation of the exchange rate (in each case assume that nothing else changes)?

Question

Quizplus · Accepted Answer

A reduction in the current account deficit, assuming no change in other parts of the balance of payments, would likely lead to an appreciation of the exchange rate. This is because a smaller current account deficit means that a country is spending less on foreign goods and services relative to what it earns from its exports, which can increase demand for its currency, thereby appreciating its value.

Which One of the Following Would Cause an Appreciation of the Exchange