Final answer:
The relative value of the dollar can either increase or decrease depending on factors such as supply and demand in the foreign exchange market and the country's inflation rate compared to other economies.
Step-by-step explanation:
The relative value of the dollar will depend on factors such as supply and demand in the foreign exchange market and the country's inflation rate compared to other economies.
If the demand for dollars in the foreign exchange market increases, while the supply decreases, the relative value of the dollar will likely increase. On the other hand, if a country experiences high inflation and the buying power of its currency decreases, the value of its currency, such as the dollar, is likely to decline.
For example, if the demand for the peso on foreign exchange markets decreases due to high inflation in Mexico, the exchange rate value of the peso will also decline. Similarly, if international financial investors demand more U.S. dollars to purchase government bonds, the exchange rate of the dollar may appreciate.