Other Things the Same,according to Purchasing-Power Parity,if Over the Next

question 62

Multiple Choice

Other things the same,according to purchasing-power parity,if over the next few years Mexico has a higher money supply growth rate than the U.S. ,then

• A)prices in Mexico will rise by a larger percentage than in the U.S.So,the dollar will appreciate against the Mexican peso.
• B)prices in Mexico will rise by larger percentage than in the U.S.So,the dollar will depreciate against the Mexican peso.
• C)prices in Mexico will rise by a smaller percentage than in the U.S.So,the dollar will appreciate against the Mexican peso.
• D)prices in Mexico will rise by a smaller percentage than in the U.S.So,the dollar will depreciate against the Mexican peso.

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Definitions:

Interest Rates

The cost of borrowing money or the return on investment, typically expressed as a percentage.

Aggregate Demand

The full scope of demand for products and services in an economy, gauged at a specified price level across a specific duration.

Investment

The act of allocating resources, usually capital, to generate a return, which can include ventures in stocks, bonds, or physical assets like real estate.

Contractionary Monetary Policy

A monetary policy strategy used by central banks to reduce inflation and cool an overheating economy, typically involving increasing interest rates and reducing the money supply.