If a Government Increases Its Budget Deficit, Which Statement Would

Multiple Choice

If a government increases its budget deficit, which statement would best predict the effects?

A) The real exchange rate appreciates, and the trade balance moves toward surplus.
B) The real exchange rate appreciates, and the trade balance moves toward deficit.
C) The real exchange rate depreciates, and the trade balance moves toward surplus.
D) The real exchange rate depreciates, and the trade balance moves toward deficit.