Assume That the U

question 21

Multiple Choice

Assume that the U.S.has an 8 percent inflation rate while Mexico has a 4 percent inflation rate.According to relative PPP,the dollar would be expected to:

• A) Appreciate by 2 percent against the Mexican peso.
• B) Depreciate by 2 percent against the Mexican peso.
• C) Appreciate by 4 percent against the Mexican peso.
• D) Depreciate by 4 percent against the Mexican peso.