Under independently floating exchange rate systems, when aggregate demand for a currency exceeds aggregate supply for a particular country:
A) The currency should strengthen and have more foreign currency units for each domestic unit
B) The currency should strengthen and have fewer foreign currency units for each domestic unit
C) The currency should weaken and have fewer foreign currency units for each domestic unit
D) The currency should weaken and have more foreign currency units for each domestic unit

Question

Quizplus · Accepted Answer

When aggregate demand for a currency exceeds aggregate supply, the currency should strengthen and have more foreign currency units for each domestic unit. This is because the increased demand for the currency will make it more valuable relative to other currencies.

Under Independently Floating Exchange Rate Systems, When Aggregate Demand for a Currency