Hugo Chavez, Venezuela's President, Proposed That the Independence of the Venezuelan

Multiple Choice

Hugo Chavez, Venezuela's president, proposed that the independence of the Venezuelan central bank be eliminated. Given the research on the relationship between central bank independence and inflation, we should expect this event to cause inflation to ________ and the real exchange rate to ________ between the two counties. (Assume the nominal exchange does not change, and that the United States is the domestic country) .

A) rise in Venezuela relative to the U.S.; fall
B) rise in Venezuela relative to the U.S.; rise
C) fall in Venezuela relative to the U.S.; rise
D) fall in Venezuela relative to the U.S.; fall