How Might a U

Multiple Choice

How might a U.S.federal budget surplus affect the balance of trade? (Assume exchange rates are stated in terms of foreign currency per U.S.dollar.)

A) A federal budget surplus raises interest rates,which raises exchange rates,and increases the balance of trade.
B) A federal budget surplus raises interest rates,which raises exchange rates,and reduces the balance of trade.
C) A federal budget surplus reduces interest rates,which raises exchange rates,and reduces the balance of trade.
D) A federal budget surplus reduces interest rates,which reduces exchange rates and increases the balance of trade.