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:

High Risk Assets

Investments that offer the potential for higher returns but come with a greater possibility of loss.

Return

The process of bringing back a purchased product to the seller or store, often for a refund or exchange.

Monopoly Firm

A company that is the sole provider of a product or service in a market, resulting in a lack of competition.

Price Maker

A market participant with the power to influence the price of a good or service by altering its supply, demand, or both.