Question

Suppose the dollar value of imports to the U.S. exceed the dollar value of exports from the US. This implies that A. foreigners are holding an excess supply of dollars. B. foreigners have a shortage of dollars. C. U.S. government spending must increase further. D. U.S. citizens and firms have a surplus of foreign currency. If foreigners have an excess supply of dollars after trading goods and services they will likely
A. be able to sell more goods and services to the U.S.
B. sell more foreign bonds.
C. buy more U.S. Treasury bonds.
D. sell more U.S. Treasury bonds.

Answer 1

Answer:

Question 1:

A) foreigners are holding an excess supply of dollars.

Since we are importing more goods (in dollar value) than what we export, foreign countries will have more dollars since we pay them in dollars.

Question 2:

C) buy more U.S. Treasury bonds.

This happens a lot with China, since we import more than we export (trade deficit), China has a large stock of dollars that enables them to buy US government securities.

Explanation: