Which of the following would cause the real exchange rate of the u. s. dollar to depreciate?
a. the u. s. government budget deficit decreases
b. capital flight from foreign countries
c. the u. s. imposes import quotas
d. none of the above is correct.

Option(A) is correct.

Explanation:

Correct option: the U.S. government budget deficit decreases.

As we all know that U.S dollar is the global currency. Mostly international transactions are done in terms of U.S dollar for purchasing goods and services.

For instance, all the contracts that are related to the oil are also priced in terms of U.S dollar. It was more advantageous for the united states for running a budget deficit.

When we are comparing U.S with the other countries, it was observed U.S can safely run a lager budget deficit as compared to other countries.

Therefore, if the U.S government budget deficit decreases, as a result this will impact the real exchange rate of the U.S. dollar to depreciate.