Suppose Inflation Is Higher in the United States Over the Next

Multiple Choice

Suppose inflation is higher in the United States over the next six months than in foreign countries. If exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods U.S. goods buy, then according to purchasing-power parity we should expect to see

A) only the nominal exchange rate depreciate.
B) both the real and nominal exchange rate appreciate.
C) both the real and nominal exchange rate depreciate.
D) only the real exchange rate appreciate.