In 2016 Venezuela Was Expected to Experience Inflation of Up

question 235

Multiple Choice

In 2016 Venezuela was expected to experience inflation of up to 700%. Given that central bank loss of independence tends to lead to inflation, we should expect this event to cause inflation to ________ and the real exchange rate to ________ between the two counties.(Assume the nominal exchange does not change, and that Canada is the "domestic" country) .

• A)rise in Venezuela relative to Canada; fall
• B)fall in Venezuela relative to Canada; fall
• C)rise in Venezuela relative to Canada; rise
• D)fall in Venezuela relative to Canada; rise
• E)fall in Venezuela relative to Canada; remain unchanged

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Definitions:

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