Recently Greece Ran Large Deficits and People Became Worried About

Multiple Choice

Recently Greece ran large deficits and people became worried about the ability of its government to make payments on its debt. Which of the these events reduces a country's real exchange rate?

A) an increase in the budget deficit, and increased concerns about the ability of the government to pay back its debt
B) an increase in the budget deficit, but not increased concerns about the ability of the government to pay back its debt
C) increased concerns about the ability of the government to pay back its debt, but not an increase in the budget deficit
D) neither an increase in the budget deficit, nor increased concerns about the ability of the government to pay back its debt