Final answer:
The statement in question is false; a growing trade deficit can lead to a decrease in the value of a country's currency due to increased demand for foreign currency to pay for imports, and concerns over reversals of foreign capital inflows.
Step-by-step explanation:
The statement that as the U.S. trade deficit has grown, pressures have begun to push the value of the dollar to higher levels is false. Typically, a growing trade deficit indicates that a country is importing more than it is exporting, which means that it has to buy more foreign currency to pay for its imports. This increased demand for foreign currency can lead to a depreciation of the domestic currency.
In the case of the United States, a large trade deficit in the late 1990s and early 2000s was coupled with a significant inflow of foreign capital. This external investment can support the value of the domestic currency temporarily. However, if international investors become less willing to hold assets in that currency, the exchange rate might weaken. Further exacerbating this situation are speculators who, anticipating a decline, may rush to sell off their assets, contributing to a further decrease in the currency's value.
Therefore, a growing trade deficit is generally associated with pressures that lower the value of the domestic currency rather than pushing it to higher levels. The concern is that if foreign capital inflows reverse, it could lead to a decrease in demand for the domestic currency and a potential financial crisis, especially for smaller economies.