The correct answer is: D. All of the above
The value of a currency is determined by supply and demand. If there is an increase in the demand for US exports, the demand for US dollars will increase, and the value of the US dollar will increase. If there is an increase in the demand for foreign imports, the supply of US dollars will increase, and the value of the US dollar will decrease. If monetary authorities intervene in the foreign exchange market by selling US dollars for foreign currencies, the supply of US dollars will increase, and the value of the US dollar will decrease.
Here is a more detailed explanation of each option:
- Option A: Increase if there is an increase in the demand for US exports by foreign countries
If there is an increase in the demand for US exports by foreign countries, the demand for US dollars will increase. This is because foreign countries will need to buy more US dollars in order to pay for US exports. As the demand for US dollars increases, the value of the US dollar will increase.
- Option B: Decrease if there is an increase in the demand for foreign imports by the United States
If there is an increase in the demand for foreign imports by the United States, the supply of US dollars will increase. This is because US residents will need to sell more US dollars in order to buy foreign imports. As the supply of US dollars increases, the value of the US dollar will decrease.
- Option C: Decrease if monetary authorities intervene in the foreign exchange market by selling US dollars for foreign currencies
If monetary authorities intervene in the foreign exchange market by selling US dollars for foreign currencies, the supply of US dollars will increase. This is because monetary authorities are selling US dollars, which increases the supply of US dollars in the market. As the supply of US dollars increases, the value of the US dollar will decrease.