If Inflation Is Higher in the United States Over the Next

question 54

Multiple Choice

If inflation is higher in the United States over the next few months than in foreign countries and exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods U.S.goods buy,then according to purchasing-power parity we should expect to see

• A)only the nominal exchange rate depreciate.
• B)both the real and nominal exchange rate appreciate.
• C)both the real and nominal exchange rate depreciate.
• D)only the real exchange rate appreciate.

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Definitions:

Interest Rate

The percentage at which interest is paid by a borrower for the use of money they borrow from a lender.

End of Year

A point in time marking the completion of a 12-month period, often used for accounting and evaluating annual performance.

Production Cost

Production cost refers to the total expense incurred in the manufacture of a product, including raw materials, labor, and overhead costs.

Rental Payments

Regular payments made by tenants to landlords in exchange for the use of residential or commercial property.