"If the Inflation Rate Differs Between Two Countries, the Exchange

question 18

Multiple Choice

"If the inflation rate differs between two countries, the exchange rate will change in such a way as to maintain constant terms of trade." This statement describes

• A)synchronization
• B)sterilization
• C)purchasing power parity
• D)comparative advantage
• E)exchange rate overshooting

---

Definitions:

Output

Refers to the total quantity of goods or services produced by an individual, company, or economy.

Expand

The process of increasing the scale, scope, or reach of an operation, business, or system, often aiming for growth or diversification.

Fixed Cost

Costs that do not vary with the level of output or activity, remaining constant regardless of production volume.