In a Setting of Flexible Exchange Rates, Suppose That the U.S

Multiple Choice

In a setting of flexible exchange rates, suppose that the U.S. citizens decrease their import purchases from the United Kingdom at the same time that British citizens increase their purchases of stocks and bonds in the United States. The first action (the U.S. imports) by itself would lead to __________ of the dollar against the pound; the second action by itself would __________ of the dollar against the pound.

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