If the Inflation Rate in Mexico Was Twice the Rate

question 25

Multiple Choice

If the inflation rate in Mexico was twice the rate in the United States, but the Mexican monetary authorities kept the peso-dollar exchange rate almost constant, which of the following would be true?

• A)The high inflation rate in Mexico would increase its citizens' purchasing power.
• B)The high inflation rate in Mexico would mean that its products would cost less overall.
• C)Mexican products would be less expensive, while U.S.-made products would become comparatively more expensive.
• D)Mexican products would be more expensive, while U.S.-made products would become comparatively less expensive.
• E)U)S.-made products would become less attractive to purchase.

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