Assume That the Following Are the Predicted Inflation Rates in These

question 93

Multiple Choice

Assume that the following are the predicted inflation rates in these countries for the year: 2% for the United States,3% for Canada;4% for Mexico,and 5% for Brazil. According to the purchasing power parity and everything else held constant,which of the following would we expect to happen?

• A)The Brazilian real will depreciate against the U.S. dollar.
• B)The Mexican peso will depreciate against the Brazilian real.
• C)The Canadian dollar will depreciate against the Mexican peso.
• D)The U.S. dollar will depreciate against the Canadian dollar.

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