Under a Floating Exchange Rate System, the Value of the Dollar

Multiple Choice

Under a floating exchange rate system, the value of the dollar per euro exchange rate rises when:

A) The U.S.trade deficit with the euro-area countries increases.
B) European demand for U.S.products increases.
C) The U.S.government raises personal income tax rates.
D) The inflation rate in the U.S.is much lower than the inflation rate in the euro-area.