Suppose Argentina Has a 10% Rate of Inflation, While Inflation

question 252

Multiple Choice

Suppose Argentina has a 10% rate of inflation, while inflation is 3% in the United States. If exchange rates do not change

• A) U.S. goods will have a disadvantage in the world market compared to Argentina.
• B) Argentine goods will become more expensive in the United States.
• C) since real exchange rates already take inflation into consideration, the inflation should have no effect on global trade.
• D) goods made in Argentina will become cheaper because pesos have lost their value.

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