If Inflation in the United States Is Relatively Higher Than

question 1

Multiple Choice

If inflation in the United States is relatively higher than inflation in Japan, and the Japanese government wants to keep the exchange rate fixed between the yen and the dollar, it should most likely ________.

• A)allow its currency to rise against the dollar
• B)allow its currency to fall against the dollar
• C)increase the supply of yen in the market
• D)decrease the supply of yen in the market

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Definitions:

Seasonal Unemployment

Unemployment resulting from the seasonal pattern of work in certain industries, with workers regularly laid off during the slow season and rehired during the busy season.

Unemployment Rate

The unemployment rate is the percentage of the labor force that is jobless and actively seeking employment.

Natural Rate

The natural rate of unemployment is the level of unemployment consistent with a stable rate of inflation.

Inflationary Wage

Wage increases that match or exceed the rate of inflation, aimed at maintaining or increasing purchasing power over time.