If the USinflation Rate Rises to the Foreign Inflation Rate, Then in Then

question 55

Multiple Choice

If the U.S.inflation rate rises to the foreign inflation rate, then in the foreign exchange market

• A) the demand for dollars increases, and the supply of dollars increases.
• B) the demand for dollars increases, and the supply of dollars decreases.
• C) the demand for dollars decreases, and the supply of dollars increases.
• D) the demand for dollars decreases, and the supply of dollars decreases.

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Definitions:

Equilibrium Price

The price at which the quantity of a product demanded by consumers equals the quantity supplied by producers, resulting in market balance.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where the quantity supplied equals the quantity demanded.

Demand Equation

A mathematical representation of the relationship between the quantity of a good demanded and various factors affecting it such as price, income, and the price of related goods.

Downsloping Demand

A concept in economics that describes the inverse relationship between the price of a good and the quantity demanded, typically illustrated by a downward-sloping demand curve.