Which of the following steps does not belong in a sequence reflecting the impact on international markets of increased borrowing to finance 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 U.S.
D)Greater demand for the dollar increases its value in exchange for other currencies.
E)The rising value of the dollar leads to increased U.S.exports and reduced imports.

Question

Quizplus · Accepted Answer

The sequence makes logical sense until the last step, which does not follow from the previous steps. An increase in the value of the dollar would actually make U.S. exports more expensive and potentially reduce demand for them in international markets, while also making imports cheaper and potentially increasing demand for them in the U.S. Therefore, step E does not belong in the sequence.

Which of the Following Steps Does Not Belong in a Sequence