People in the Bahamas Use Both Bahamian Dollars and U

question 41

Multiple Choice

People in the Bahamas use both Bahamian dollars and U.S.dollars to pay for goods and services.Suppose that the Fed increases money supply,causing higher inflation rate in the U.S.If the exchange rate were allowed to float,the U.S.dollar will ________ against the Bahamian dollar and Bahamians will substitute toward more __________ holding.

• A) appreciate; Bahamian dollars
• B) appreciate; U.S. dollars
• C) depreciate; Bahamian dollars
• D) depreciate; U.S. dollars

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