Exhibit 16.1
At the Plaza Accord of 1985,the Group-of-Five nations agreed to drive the value of the dollar downward (i.e.,depreciation) so as to help reduce the U.S.trade deficit.Answer the following question(s) on the basis of this information.
-Refer to Exhibit 16.1.The Federal Reserve might refuse to support the accord on the grounds that when helping to drive the dollar's exchange value downward,it promotes an increase in the U.S.:
A) Rate of inflation
B) Budget deficit
C) Unemployment level
D) Economic growth rate

Question

Exhibit 16.1 
At the Plaza Accord of 1985,the Group-of-Five nations agreed to drive the value of the dollar downward (i.e.,depreciation) so as to help reduce the U.S.trade deficit.Answer the following question(s) on the basis of this information.
-Refer to Exhibit 16.1.The Federal Reserve might refuse to support the accord on the grounds that when helping to drive the dollar's exchange value downward,it promotes an increase in the U.S.:
A) Rate of inflation
B) Budget deficit
C) Unemployment level
D) Economic growth rate

Quizplus · Accepted Answer

When the value of the dollar depreciates, it results in an increase in the price of imported goods, which can lead to inflation. Therefore, the Federal Reserve might refuse to support the accord on the grounds that it promotes an increase in the rate of inflation.

Exhibit 16.1 at the Plaza Accord of 1985,the Group-Of-Five Nations Agreed to Nations