Under a System of Flexible Exchange Rates, Which of the Following

question 144

Multiple Choice

Under a system of flexible exchange rates, which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

• A) a decrease in domestic interest rates
• B) an increase in foreign interest rates
• C) domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices
• D) stable domestic prices while the nation's trading partners are experiencing 10 percent inflation

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