If Inflation in Country a Exceeds Inflation in Country B

question 94

Multiple Choice

If inflation in country A exceeds inflation in country B, purchasing power parity implies that:

• A) the currency of country B should depreciate relative to the currency of country A.
• B) the inflation rate in country B will rise to match the inflation rate in country A.
• C) the currency of country A will depreciate relative to the currency of country B.
• D) the inflation rate in country A will fall to match the inflation rate in country B.

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Definitions:

Cost

The amount of money required to purchase something or to produce a good or service.

Invoice

A document issued by a seller to a buyer that lists goods or services provided and the amount due.

Terms

Conditions and stipulations that are part of an agreement or contract.

Terms

Conditions and agreements under which a service, sale, or transaction is conducted.