Question

If the U.S. economy runs a balance of trade deficit, which of the following statements are TRUE? I U.S. currency values will increase relative to that of foreign countries II U.S. currency values will decrease relative to that of foreign countries III U.S. exports should become more expensive to foreign countries IV U.S. exports should become less expensive to foreign countries StatusA A. I and III StatusB B. I and IV StatusC C. II and III StatusD D. II and IV

Answer 1

The correct answer to the question is StatusD: II and IV, which states that the U.S. currency values will decrease relative to that of foreign countries, and U.S. exports should become less expensive to foreign countries when running a trade deficit.

Step-by-step explanation:

If the U.S. economy runs a balance of trade deficit, it means that the value of imports exceeds that of exports. In this scenario, the following statements would generally hold true:

• The demand for the country's currency would decrease, leading to a potential decrease in its value compared to foreign currencies.
• As a result, U.S. exports might become less expensive to foreign countries as the U.S. dollar weakens.

In light of these points, the correct answer to the question is Statement II: U.S. currency values will decrease relative to that of foreign countries and Statement IV: U.S. exports should become less expensive to foreign countries.

Therefore, the answer is StatusD: II and IV.