Question

As the U.S. trade deficit has grown, pressures have begun to push the value of the dollar to higher levels

A) True, a growing trade deficit correlates with a stronger currency
B) False, a trade deficit typically weakens a country's currency
C) Partially true, the relationship between trade deficit and currency value is complex
D) Incorrect, the trade deficit does not impact the value of a country's currency

Answer 1

False, a trade deficit typically weakens a country's currency.

Step-by-step explanation:

False, a trade deficit typically weakens a country's currency.

Trade deficit refers to the situation when the value of a country's imports is higher than its exports. When a country has a trade deficit, it means that it is spending more on imported goods and services than it is earning from its exports. This leads to an increase in the demand for foreign currency, which weakens the value of the country's currency.

For example, if the United States has a trade deficit, it means that it is importing more goods from other countries than it is exporting. This results in a higher demand for foreign currency, such as the euro or the yuan, which weakens the value of the U.S. dollar.