Under a system of flexible exchange rates, transactions that increase the supply of the nation's currency to the foreign exchange market will cause the nation's

Question

Quizplus · Accepted Answer

According to the basic principles of supply and demand, an increase in the supply of a currency will cause its value to depreciate in relation to other currencies. As a result, goods and services produced in the country will become less expensive for foreign consumers, which may encourage greater demand for those products and potentially help to reduce the country's trade deficit.

Under a System of Flexible Exchange Rates, Transactions That Increase