If the Inflation Rate in the United States Is Higher

question 35

Multiple Choice

If the inflation rate in the United States is higher than that in Mexico and productivity is growing at a slower rate in the United States than in Mexico,then,in the long run,________,everything else held constant.

• A)the Mexican peso will appreciate relative to the U.S. dollar
• B)the Mexican peso will depreciate relative to the U.S. dollar
• C)the Mexican peso will either appreciate,depreciate,or remain constant relative to the U.S. dollar
• D)there will be no effect on the Mexican peso relative to the U.S. dollar

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Definitions:

Softening Economy

A term used to describe an economic state where growth is slowing down, signaling a potential downturn or lesser economic activity.

Government Spending Multiplier

A coefficient that measures the change in total income resulting from a unit change in government spending.

Fiscal Policy

Government policies regarding taxation and spending that are aimed at influencing a country's economic conditions.

Supply-Side Effect

Economic effects that result from changes in production capacity and costs, influencing the aggregate supply in the economy.