Multiple Choice
How might a budget deficit affect the balance of trade?
A) A budget deficit raises interest rates, which raises exchange rates and increases the balance of trade.
B) A budget deficit raises interest rates, which raises exchange rates and reduces the balance of trade.
C) A budget deficit reduces interest rates, which raises exchange rates and reduces the balance of trade.
D) A budget deficit reduces interest rates, which reduces exchange rates and reduces the balance of trade.
E) A budget deficit raises interest rates, which reduces exchange rates, and reduces the balance of trade.
Correct Answer:
Verified
Correct Answer:
Verified
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