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Currency Values Under a Flexible Exchange Rate System Are Determined

Question 20

Multiple Choice

Currency values under a flexible exchange rate system are determined by the forces of supply and demand. Other things equal, if U.S. incomes, U.S. inflation, or foreign interest rates increase


A) there will be a decreased demand for foreign goods, services and securities, an increase in the supply of dollars, and the dollar will appreciate.
B) there will be an increased demand for foreign goods, services and securities, an increase in the supply of dollars, and the dollar will appreciate.
C) there will be an increased demand for foreign goods, services and securities, an increase in the supply of dollars, and the dollar will depreciate.
D) there will be a decreased demand for foreign goods, services and securities, an increase in the supply of dollars, and the dollar will depreciate.

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