If a Country Has a High Rate of Inflation Relative

question 20

Multiple Choice

If a country has a high rate of inflation relative to Canada (holding the real exchange rate fixed) , the dollar will buy:

• A)less of the foreign currency over time.
• B)more of the foreign currency over time.
• C)the same amount of the foreign currency over time.
• D)an amount of foreign currency determined by the real exchange rate.

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Definitions:

Paying Rent

The act of making a payment for the temporary use of a property or space owned by another individual or entity.

Present Value

The estimated value in today's terms of a sum of money or series of cash flows expected in the future, according to a specific rate of return.

Interest Rate

The percentage charged on the total amount of borrowed money or paid as earnings on investment, typically annualized.

Interest Rate

The cost of borrowing money, expressed as a percentage of the total amount borrowed, paid by the borrower to the lender for the use of their money.