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    Suppose interest rates fall sharply in the U.S. but are unchanged in Great Britain.

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    1. Suppose interest rates fall sharply in the U.S. but are unchanged in Great Britain. Other things equal, under a system of freely floating exchange rates we can expect the demand for pounds in the U.S. to:
    A. decrease,the supply pounds to increase, and the dollar to appreciated relative to the pound.
    B. increase, the supply of pounds to increase, and the dollar may either appreciate or depreciate relative to the pound.
    C. increase, the supply of pounds to decrease, and the dollar to depreciate relative to the pound.
    D. decrease, the supply of pounds to increase, and the dollar to depreciate relative to the pound.

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    Solution Summary

    The expert determines why interest rates fall sharply in the United States by are unchanged in the United Kingdom.

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