If Over the Next Six Months Inflation Is Higher in the U.S.than

question 56

Multiple Choice

If over the next six months inflation is higher in the U.S.than in foreign countries,then according to purchasing-power parity

• A)only the nominal exchange rate depreciates.
• B)both the real and nominal exchange rate appreciate.
• C)both the real and nominal exchange rate depreciate.
• D)only the real exchange rate appreciates.

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Definitions:

Pigeonholing

The practice of classifying or categorizing people, ideas, or objects narrowly and often unfairly, limiting potential or understanding.

Funder's First Law

A principle in psychology which suggests that important or extreme behavior in one situation tends to be important or extreme in other situations as well.

Psychoanalytic

Relating to or based on the theories of Sigmund Freud, focusing on unconscious motivations and conflicts as drivers of human behavior and psychological problems.

Unconscious Conflict

A term used in psychoanalysis to describe a struggle or clash between opposing wishes or desires that exist outside of conscious awareness.