Other things the same, if the U.S. price level falls, then
A)the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises.
B)the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls.
C)the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.
D)the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.

Question

Quizplus · Accepted Answer

If the U.S. price level falls, then goods and services in the United States become cheaper relative to those in other countries. As a result, demand for U.S. dollars in the market for foreign-currency exchange decreases, and the supply of dollars increases. This increase in supply puts downward pressure on the exchange rate, causing it to fall.

Other Things the Same, If the U