Between 1998 and the end of 2000, the U.S.ran a large trade deficit; this should have caused the dollar to depreciate against foreign currencies but instead the dollar appreciated.The main reason for this is:

Question

Quizplus · Accepted Answer

The dramatic increase in U.S. stock prices attracted a lot of foreign capital increasing the demand for dollars by more than the increase in the supply of dollars. This resulted in the appreciation of the dollar despite the trade deficit, as the demand for dollars exceeded the supply.

Between 1998 and the End of 2000, the U