If consumer tastes in the United States change in favor of goods produced in France, then the demand for francs will increase, which causes an appreciation of the dollar against the franc under a floating exchange rate system.

Question

Quizplus · Accepted Answer

If the demand for francs increases, then the value of the franc should increase and the dollar should depreciate. The appreciation of the dollar against the franc would only occur if there was a decrease in the demand for francs.

If Consumer Tastes in the United States Change in Favor