If the Rate of Inflation Is Suddenly Expected to Be

question 30

Multiple Choice

If the rate of inflation is suddenly expected to be 8% higher than previously anticipated in the US than in the UK,the dollar should immediately depreciate by what percent with respect to the pound in order to keep prices equal in the US and the UK?

• A)8%
• B)10%
• C)6%
• D)9%

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Definitions:

Unemployment Rate

The rate at which individuals in the labor force are unemployed and actively looking for a job.

Disinflation

A decrease in the rate of inflation, indicating a slowdown in the rate at which prices for goods and services are rising.

Nominal Interest Rates

The reported percentage rate without adjusting for the inflation rate, reflecting the cost of borrowing money.

Unemployment

The situation where individuals who are able and willing to work are unable to find a job, expressed as a percentage of the labor force.