In 2009, U.S. liabilities were dollar-denominated corporate and official debt for the most part, while U.S. external assets were mostly equities, bank loans, government debt, and foreign direct investment, denominated in foreign currencies. When the dollar fell in the wake of the financial crisis, what net effect was there on U.S. external wealth?

Question

Quizplus · Accepted Answer

Since U.S. external assets were mostly denominated in foreign currencies, their value increased when the dollar fell. Additionally, the value of liabilities, which were already denominated in dollars, changed little. Therefore, the net effect was that external wealth increased.