If the euro/U.S.dollar exchange rate is 1.1€/U.S. $ in New York but 1.05€/U.S. $ in London, we should see:
A. people selling euros and buying dollars in New York and then buying euros by selling dollars in London.
B. the dollar should appreciate in New York relative to the euro.
C. people selling U.S. dollars and buying euros in New York and then selling those euros and buying $'s in London.
D. the price differential between the markets increase as people seek to take advantage of the situation.
Answer: C
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