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 the imports
E) Increased communism in the United States

Question

Quizplus · Accepted Answer

Increased foreign investments in U.S. financial assets led to an increased demand for dollars, causing the dollar to rise against other currencies. Despite the balance-of-payments deficit, investors were attracted to the U.S. because of its strong economy and stable political system.

Which of the Following Explains the Rise of the Dollar