The U.S. dollar's effective exchange rate since 2002 has steadily weakened. However, it didn't weaken as much against ALL currencies as it did against the currencies of the major developed countries (which include the pound and the euro). This could be because:
a. the U.S. government has a strong dollar policy.
b. the large trading partners, China and Japan, did not allow their currencies to appreciate greatly against the U.S. dollar.
c. the rate of appreciation is always somewhat greater than the rate of depreciation.
d. the United States does not trade with some nations, so the effective rate is biased.
Ans: b. the large trading partners, China and Japan, did not allow their currencies to appreciate greatly against the U.S. dollar.
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