Suppose There Is an Increased Demand from Foreign Countries for Iowa

question 69

Multiple Choice

Suppose there is an increased demand from foreign countries for Iowa pork. What happens to the U.S. dollar exchange rate in a flexible foreign currency market?

• A) The demand and supply of U.S. dollars increase, leading to an increase in the quantity of dollars traded and an indeterminate effect on the exchange rate.
• B) The supply of U.S. dollars increases, causing the U.S. dollar exchange rate to fall.
• C) The demand for U.S. dollars increases and the supply decreases, leading to an increase in the U.S. dollar exchange rate.
• D) The demand for U.S. dollars increases, causing the U.S. dollar exchange rate to rise.

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Definitions:

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