In considering pounds and dollars we can say that when the dollar rate of exchange for the pound rises

A) the pound rate of exchange for the dollar will fall.
B) the pound rate of exchange for the dollar will also rise.
C) the pound rate of exchange for the dollar may either fall or rise.
D) American net exports to Britain will tend to fall.

When the dollar rate of exchange for the pound rises, it means that more dollars can be exchanged for one pound. This makes pounds more expensive in relation to dollars. Therefore, the demand for pounds decreases, causing the pound rate of exchange for the dollar to fall. This relationship between the two currencies is often referred to as an inverse relationship. Additionally, as the pound becomes more expensive, American net exports to Britain tend to fall because British goods become relatively cheaper for American consumers while American goods become relatively more expensive for British consumers.