When a country uses a flexible (or floating) exchange rate and its transactions increase the supply of its currency, the country's:

Question

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When a country uses a flexible exchange rate, the value of its currency is determined by the forces of supply and demand in the foreign exchange market. If the supply of a country's currency increases, this means that there are more people selling the currency than there are people buying it. This will cause the value of the currency to depreciate, which means that it will become less expensive for foreigners to buy the country's products.

When a Country Uses a Flexible (Or Floating) Exchange Rate