In 2016 Venezuela Was Expected to Experience Inflation of Up

Multiple Choice

In 2016 Venezuela was expected to experience inflation of up to 700%. Given that central bank loss of independence tends to lead to 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 Canada is the "domestic" country) .

A) rise in Venezuela relative to Canada; fall
B) fall in Venezuela relative to Canada; fall
C) rise in Venezuela relative to Canada; rise
D) fall in Venezuela relative to Canada; rise
E) fall in Venezuela relative to Canada; remain unchanged