If the Inflation Rate in Canada Is Higher Than That

question 20

Multiple Choice

If the inflation rate in Canada is higher than that in Mexico and productivity is growing at a slower rate in Canada than in Mexico, then, in the long run, ________, everything else held constant.

• A) the Mexican peso will appreciate relative to the Canadian dollar
• B) the Mexican peso will depreciate relative to the Canadian dollar
• C) the Mexican peso will either appreciate, depreciate, or remain constant relative to the Canadian dollar
• D) there will be no effect on the Mexican peso relative to the Canadian dollar

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