AP Macroeconomics Question 417: Answer and Explanation

Test Information

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Question: 417

4. How does an increasing national debt impact the market for U.S. dollars and the value of the dollar with respect to other currencies?

MARKET FOR THE DOLLAR     VALUE OF THE DOLLAR

  • A. Increased demand     Appreciating
  • B. Increased supply     Appreciating
  • C. Decreased supply     Depreciating
  • D. Decreased demand     Depreciating
  • E. Increased demand     Depreciating

Correct Answer: A

Explanation:

A-Rising national debt increases interest rates and attracts foreign investment in U.S. financial assets. Greater demand for dollars appreciates the dollar.