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If Confidence in the American economy were to fall dramatically, the dollar would likely? A. Depreciate...

If Confidence in the American economy were to fall dramatically, the dollar would likely?

A. Depreciate

B. Appreciate

C. Not Change

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Answer #1

The Answer is (A) Depreciate.

Reason:- If people's confidence in the American economy falls dramatically, then people will be less confident to invest in America. In other words, America will not be an attractive place to invest which, in turn, will reduce the interest rate of investment in America due to lack of investment. The money will flow to other countries where the interest rate will be high compared to America. People will demand more foreign currency and will sell out dollars. This process will lead to the reduction of the value dollar compared to foreign currencies. Hence the dollar will depreciate.

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