The UK saw its trade in goods deficit rise during 2003 to 2007, yet the exchange rate remained steady. What might explain why the trade deficit did not lead to a change in the exchange rate?
- AInvestment income earned by foreigners in the UK was greater than that earned by UK residents on assets held abroad.
- BSpeculators anticipated that the trade deficit would result in a fall in the value of the pound.
- CThe UK’s trade in goods deficit was larger than its trade in services surplus.
- DThe UK attracted a net inflow of foreign direct and portfolio investment.