If the USInflation Rate Is 3 Percent Annually and the Swiss Inflation

question 80

Multiple Choice

If the U.S.inflation rate is 3 percent annually and the Swiss inflation rate is 5 percent annually,by what percent would the dollar price of francs need to change according to purchasing power parity?

• A) Depreciate by 5 percent
• B) Appreciate by 3 percent
• C) Appreciate by 5 percent
• D) Depreciate by 2 percent
• E) Appreciate by 2 percent.

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Definitions:

Microchips

Compact devices made of semiconductor material, which include integrated circuits, used across a wide range of tech applications.

Tires

Rubber coverings placed around wheels to provide traction, support the vehicle's load, and absorb shocks from the road surface.

Absolute Advantage

A condition where a country, individual, or company can produce a good or service at a lower cost in terms of labor and resources than competitors.

Comparative Advantage

An economic theory stating that in order to gain from trade, countries should specialize in producing goods for which they have a lower opportunity cost.