When a country uses a flexible (or floating)exchange rate and transactions increase the supply of its currency,the country's:

Question

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With a flexible (or floating) exchange rate, the value of a currency is determined by the supply and demand in the foreign exchange market. When transactions increase the supply of a currency, the demand for that currency decreases, causing the value of the currency to depreciate. As the currency depreciates, the country's products become cheaper to others, which can stimulate exports and help to reduce a trade deficit.

When a Country Uses a Flexible (Or Floating)exchange Rate and Transactions