Assume Exchange Rates Are Flexible

question 74

Multiple Choice

Assume exchange rates are flexible.The existence of inflation in a country that is higher than inflation in the rest of the world will tend to

• A)increase the demand for that country's currency in the foreign-exchange market,and lead to an appreciation of that currency.
• B)increase the supply of that country's currency in the foreign-exchange market,and lead to a depreciation of that currency.
• C)increase its exports.
• D)decrease its imports.
• E)have no effect on the foreign-exchange market.

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Definitions:

Legal Capacity

The ability of an individual or entity to enter into legally binding contracts, including the ability to sue and be sued, own property, and engage in other legal activities.

Unauthorized Acts

Actions taken by an individual or entity without legal or official approval, which may be illegal or against regulatory standards.

Undisclosed Principal

In agency law, a principal whom a third party lacks knowledge or the reason to know the principal’s existence and identity.

Unidentified Principal

In agency law, a principal whom a third party knows or has reason to know exists but who lacks knowledge or reason to know the principal’s identity.