Assume That Brazil Has a Constant Money Supply and That

Multiple Choice

Assume that Brazil has a constant money supply and that it devalues its currency.The monetary approach to devaluation reasons that one of the following tends to occur for Brazil.

A) Domestic prices rise, the purchasing power of money falls, and consumption falls.
B) Domestic prices rise, the purchasing power of money rises, and consumption rises.
C) Domestic prices fall, the purchasing power of money rises, and consumption falls.
D) Domestic prices fall, the purchasing power of money rises, and consumption rises.