Final answer:
An improvement in the quality of U.S. goods would cause an increase in both the demand for dollars and the exchange rate.
Step-by-step explanation:
An improvement in the quality of U.S. goods would lead to an increase in the demand for dollars because foreign buyers would need more dollars to purchase these higher quality goods. As a result, the value of the dollar tends to increase relative to other currencies. Therefore, the exchange rate would increase since foreigners must now pay more of their own currency to get the same amount of dollars for buying U.S. goods. Combining these effects, the correct answer to the question is an increase in the demand for dollars and an increase in the exchange rate, which corresponds to option B.