If the Inflation Rate in Canada Is Higher Than That

Multiple Choice

If the inflation rate in Canada is higher than that in Mexico and productivity is growing at a slower rate in Canada than in Mexico, then, in the long run, ________, everything else held constant.

A) the Mexican peso will appreciate relative to the Canadian dollar
B) the Mexican peso will depreciate relative to the Canadian dollar
C) the Mexican peso will either appreciate, depreciate, or remain constant relative to the Canadian dollar
D) there will be no effect on the Mexican peso relative to the Canadian dollar