Which of the following statements about the relationship between the federal budget and net exports is the most accurate?

Question

Quizplus · Accepted Answer

When the federal budget moves toward deficit, it puts upward pressure on interest rates, which attracts foreign investment and leads to an appreciation of the exchange rate. This, in turn, makes exports more expensive and imports cheaper, decreasing net exports. Conversely, when the federal budget moves towards surplus, it puts downward pressure on interest rates, which discourages foreign investment and leads to a depreciation of the exchange rate. This makes exports cheaper and imports more expensive, increasing net exports. Therefore, the most accurate statement is that when the federal budget moves toward deficit, net exports tend to decrease.

Which of the Following Statements About the Relationship Between the Federal