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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Definitions:

Average Total Cost

The total cost of production divided by the quantity of output produced, representing the cost per unit of production.

Economies of Scale

Cost advantages obtained by an increase in production, leading to a reduction in average costs per unit.

Long-run Average Total Cost

The average total cost of production when all inputs, including capital, are variable, typically illustrating economies of scale.

Marginal Cost

The increased cost resulting from the creation of one more unit of a good or service.