Everything else equal, if the United States runs a large foreign trade deficit, the financing of the deficit will:
A)decrease sales of Treasury securities.
B)increase interest rates.
C)increase government subsidies.
D)increase the money supply.
E)decrease tax revenue.

Question

Quizplus · Accepted Answer

When the US runs a large foreign trade deficit, it means the country is importing more goods and services than it is exporting. To finance the deficit, the US must borrow from foreign investors. This increased borrowing will increase demand for loans and drive up interest rates.

Everything Else Equal, If the United States Runs a Large