There Is a Flexible Exchange Rate System and Only Two

question 1

Multiple Choice

There is a flexible exchange rate system and only two countries in the world,the United States and Mexico.If the inflation rate in the United States rises relative to the inflation rate in Mexico,it follows that

• A) the dollar will appreciate and the peso will depreciate.
• B) both the dollar and the peso will appreciate,although the peso will appreciate before the dollar appreciates.
• C) the dollar will depreciate and the peso will appreciate.
• D) both the dollar and the peso will depreciate,although the peso will depreciate before the dollar depreciates.
• E) There is not enough information to answer the question.