In a floating exchange rate system,an increase in the value of the exchange rate could be caused by

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In a floating exchange rate system, the exchange rate is determined by the demand for and supply of the domestic currency in the foreign exchange market. An increase in the value of the exchange rate means that the domestic currency has become stronger relative to foreign currencies. One of the causes of an increase in the exchange rate is a decrease in the domestic money supply, which increases the demand for the currency, leading to an appreciation in its value. None of the other choices listed would directly affect the demand for or supply of the domestic currency, and so would not cause a change in the exchange rate.

In a Floating Exchange Rate System,an Increase in the Value