Under a system of flexible exchange rates, an increase in the foreign demand for the U.S. dollar in the foreign exchange market will cause the:

Question

Quizplus · Accepted Answer

If there is an increase in the foreign demand for US dollar, it means that more people or countries want to buy US dollars. This would increase the demand for US dollar in the foreign exchange market, which will result in an appreciation of the US dollar. The value of the US dollar will increase in relation to other currencies.

Under a System of Flexible Exchange Rates, an Increase in the Foreign