Multiple Choice
Suppose, the purchasing power parity holds and real exchange rate remains constant. If the inflation rate in USA is 10% and Canada's inflation rate is 4%, then the nominal exchange rate of US dollar will:
A) decrease by approximately 10%
B) increase by approximately 10%
C) decrease by approximately 6%
D) increase by approximately 6%
Correct Answer:
Verified
Correct Answer:
Verified
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