Assume Exchange Rates Are Flexible

Multiple Choice

Assume exchange rates are flexible.The existence of inflation in a country that is higher than inflation in the rest of the world will tend to

A) increase the demand for that country's currency in the foreign-exchange market,and lead to an appreciation of that currency.
B) increase the supply of that country's currency in the foreign-exchange market,and lead to a depreciation of that currency.
C) increase its exports.
D) decrease its imports.
E) have no effect on the foreign-exchange market.