A foreign country experiences economic growth, leading to increased income. How does this affect the demand for US dollars and the exchange rate?

• A. Demand for US dollars remains unchanged, and the exchange rate stays the same.
• B. Demand for US dollars increases, leading to a higher exchange rate.
• C. Demand for US dollars decreases, leading to a lower exchange rate.
• D. Demand for US dollars increases, but the exchange rate decreases.

Answer: (B)