Suppose Two Countries,A and B,are Trading with Each Other

question 27

Multiple Choice

Suppose two countries,A and B,are trading with each other.Suppose also that the rate of inflation in B is higher than in A.There will be

• A)an increase in the demand for Country B's currency in the foreign-exchange market.
• B)an increase in Country B's exports.
• C)a decrease in Country B's imports.
• D)an increase in the supply of Country B's currency in the foreign-exchange market.
• E)no effect on the foreign-exchange market.