If foreigners suddenly reduced their investments in the United States, what would happen?
A) The value of the dollar on foreign exchange markets would increase.
B) The action would have no impact on the U.S. economy.
C) The foreigners would sell U.S. dollars for another currency.
D) The price of U.S. exports would increase.

Question

Quizplus · Accepted Answer

Instead of reinvesting the dollars they earn from exports and investment in the United States back into the country, they would sell those dollars for another currency. This would lead to a fall in the value of the dollar on foreign exchange markets, and that in turn would increase the price of imports, and lower the price of U.S. exports.

If Foreigners Suddenly Reduced Their Investments in the United States