Under a System of Flexible Exchange Rates, an Increase in the Supply

question 147

Multiple Choice

Under a system of flexible exchange rates, an increase in the supply of foreign exchange (an increase in the demand for the dollar) will cause the

• A) dollar to appreciate.
• B) dollar to depreciate.
• C) U.S. trade deficit to decrease.
• D) U.S. inflation rate to increase.

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Definitions:

Demand for Capital

The desire for acquiring new machinery, buildings, and other investments to expand business operations or efficiency.

Wage Rate

The amount of payment that a worker receives per unit of time (hourly, daily, etc.) or per unit of output.

Substitute Resources

Alternative products or services that can replace each other in use, offering consumers choices and influencing supply and demand dynamics in markets.

Employment of Land

The use of land resources for productive or economic activities, including farming, building, or conservation efforts.