A restaurant owner in the United States purchases five crates of wine from a French wine maker for $500 in May. In June, the same five crates of wine cost $700. The international system is operating under a

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In a fixed exchange rate system, the exchange rate between currencies is set and maintained by the government. In a modified exchange rate system, the exchange rate is allowed to fluctuate within a certain range. In a final exchange rate system, there is no possibility of changing the exchange rate. Therefore, the only possible answer is a floating exchange rate system, where the exchange rate is determined by supply and demand in the foreign exchange market and can fluctuate freely. The increase in the price of the wine from $500 to $700 suggests that the value of the dollar relative to the euro must have decreased over that time period, resulting in a more expensive price for the wine in dollars.

A Restaurant Owner in the United States Purchases Five Crates