Suppose Country a Pegs Its Nominal Exchange Rate to Country

question 40

Multiple Choice

Suppose country A pegs its nominal exchange rate to country B and that country A has a higher inflation rate than country B.In this situation,country A will experience

• A)a real appreciation.
• B)a worsening trade position.
• C)an increase in the real exchange rate.
• D)all of the above
• E) none of the above

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Definitions:

Equivalent

Equal in value, function, or meaning, often referring to items that can be substituted for one another in specific contexts.

Concept

An abstract idea or a mental symbol that typically represents a class of things or phenomena.

Referent

The real object or item in existence that is signified or represented by a word or expression.

Equivalent

Equal in value, measure, force, effect, significance, etc.