If the Inflation Rate in Canada Is Lower Than in Mexico

question 163

Multiple Choice

If the inflation rate in Canada is lower than in Mexico, then:

• A) The dollar will depreciate relative to the Mexican peso.
• B) The exchange rate for the Mexican peso will increase.
• C) The Mexican peso will appreciate in value.
• D) Absolute purchasing power parity will not be able to exist.
• E) The exchange rate for the peso will decrease to offset the higher prices in Mexico.

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Production Possibilities Curve

A graphical representation that shows the maximum quantity of one good that can be produced for every possible quantity of another good produced, given available resources and technology.

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A situation in which the opportunity costs of resources decrease as more of a good is produced.

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A situation where increasing production of one good requires larger and larger sacrifices in the production of another good due to limited resources.