Which one of the following statements is correct assuming that exchange rates are quoted as units of foreign currency per dollar?
A) The exchange rate moves in the same direction as the value of the dollar.
B) The exchange rate is unaffected by differences in the inflation rates of the two countries.
C) The exchange rate falls as the dollar strengthens.
D) When a foreign currency appreciates in value it weakens relative to the dollar.
E) The exchange rate rises when the U.S.inflation rate is higher than the foreign country's rate.
Correct Answer:
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