How Might a Budget Deficit Affect the Balance of Trade

question 151

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.

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Definitions:

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