Continued U.S.trade deficits coupled with foreigners' desire to diversify their currency holdings away from U.S.dollars
A)could further diminish the position of the dollar as the dominant reserve currency.
B)could affect the value of U.S.dollar (e.g.,through the currency diversification decisions of Asian central banks).
C)could lend steam to the emergence of the euro as a credible reserve currency.
D)all of the options

Question

Quizplus · Accepted Answer

All of the options are valid possibilities. Continued trade deficits could lead to a decline in the dominance of the U.S. dollar as the preferred reserve currency, while foreign investors diversifying away from the dollar could impact the value of the currency. This could also contribute to the emergence of the euro as a viable alternative reserve currency. Therefore, all of the options presented are plausible outcomes of these economic conditions.