If the US Experiences Higher Inflation Relative to Australia, Then

question 64

Multiple Choice

If the US experiences higher inflation relative to Australia, then in the foreign exchange market, ceteris paribus, we would expect:

• A) the demand for Australian dollars to shift to the left, causing an appreciation of the Australian dollar.
• B) the demand for Australian dollars to shift to the left, causing a depreciation of the Australian dollar.
• C) the supply of Australian dollars to shift to the right, causing a depreciation of the Australian dollar.
• D) the supply of Australian dollars to shift to the left, causing an appreciation of the Australian dollar.

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