Under a System of Flexible Exchange Rates, the Portfolio Balance

Multiple Choice

Under a system of flexible exchange rates, the portfolio balance approach suggests that an increase in real income in a home country will lead to __________ of that country's Currency; under flexible rates, the monetary approach suggests that an increase in real Income in a home country __________ of that country's currency.

A) a depreciation; will lead to an appreciation
B) a depreciation; also will lead to a depreciation
C) an appreciation; also will lead to an appreciation
D) an appreciation; will lead to a depreciation