Which of the following explains the rise of the dollar against most major currencies in the late 1990s, even though the United States was still running a significant balance-of-payments deficit?
A)Reduced government intervention in the foreign exchange market
B)Increased foreign investments in U.S. financial assets
C)Low real interest rates in the United States compared to the rest of the world
D)Increased exports as opposed to imports
E)Increased communism in the United States

Question

Quizplus · Accepted Answer

In the late 1990s, the dollar again began to appreciate against most major currencies, including the euro after its introduction, even though the United States was still running a significant balance-of-payments deficit. Once again, the driving force for the appreciation in the value of the dollar was that foreigners continued to invest in U.S. financial assets, primarily stocks and bonds, and the inflow of money drove up the value of the dollar on foreign exchange markets. The inward investment was due to a belief that U.S. financial assets offered a favorable rate of return.

Which of the Following Explains the Rise of the Dollar