Suppose inflation is higher in South Africa over the next few months than in foreign countries, and exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods are equivalent in cost to one South Africa good. According to purchasing-power parity, which of the following should we expect to see? a) Both the real and nominal exchange rates appreciate. b) Both the real and nominal exchange rates depreciate. c) Only the nominal exchange rate depreciates. d) Only the real exchange rate appreciates.
Suppose inflation is higher in South Africa over the next few months than in foreign countries, and exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods are equivalent in cost to one South Africa good. According to purchasing-power parity, which of the following should we expect to see? a) Both the real and nominal exchange rates appreciate. b) Both the real and nominal exchange rates depreciate. c) Only the nominal exchange rate depreciates. d) Only the real exchange rate appreciates.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter6: Managing In The Global Economy
Section: Chapter Questions
Problem 12E
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