Which of the following is one of the reasons for the rapid rise in the value of the dollar between 1980 and 1985 despite a large trade deficit?
A)Political stability in all other parts of the world
B)Heavy capital outflows from the United States
C)Low real interest rates in the United States
D)Slow economic growth in the developed countries of Europe
E)Increasing exports against decreasing imports in the United States

Question

Quizplus · Accepted Answer

The rise in the value of the dollar between 1980 and 1985 occurred when the United States was running a large and growing trade deficit, importing substantially more than it exported. A number of favorable factors overcame the unfavorable effect of a trade deficit. High real interest rates in the U.S. attracted foreign investors seeking high returns on financial assets. At the same time, political turmoil in other parts of the world, along with relatively slow economic growth in the developed countries of Europe, helped create the view that the United States was a good place to invest.

Which of the Following Is One of the Reasons for the Rapid