An increase in the U.S. demand for imports will ________ the supply of dollars and lead the dollar to ________.
A) increase; appreciate
B) decrease; appreciate
C) increase; depreciate
D) decrease; depreciate

Question

Quizplus · Accepted Answer

When U.S. demand for imports increases, more dollars are offered in exchange for foreign currencies to pay for these imports, increasing the supply of dollars in the foreign exchange market. An increased supply of dollars, all else being equal, leads to a depreciation of the dollar's value as it becomes more plentiful relative to other currencies.

An Increase in the U