Currency Values Under a Flexible Exchange Rate System Are Determined

question 67

Multiple Choice

Currency values under a flexible exchange rate system are determined by the forces of supply and demand. Other things equal, if U.S. incomes, U.S. inflation, or foreign interest rates increase

• A)there will be a decreased demand for foreign goods, services and securities, an increase in the supply of dollars, and the dollar will appreciate.
• B)there will be an increased demand for foreign goods, services and securities, an increase in the supply of dollars, and the dollar will appreciate.
• C)there will be an increased demand for foreign goods, services and securities, an increase in the supply of dollars, and the dollar will depreciate.
• D)there will be a decreased demand for foreign goods, services and securities, an increase in the supply of dollars, and the dollar will depreciate.

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Definitions:

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