Asked by Punam Khatri on Sep 24, 2024
Verified
Holding other things constant,an increase in the inflation rate in the US compared to China may cause the demand for dollar to _____________ and the supply for dollar to __________.
A) Increase;decrease
B) Increase,increase
C) Decrease;Increase
D) Decrease;Decrease
Inflation Rate
The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
Demand
The desire and ability of consumers to purchase goods or services at given prices.
Supply
The total amount of a product or service that is available for purchase at any given price.
- Apprehend the influence that differing inflation rates between two economies have on currency supply and demand dynamics.
Verified Answer
LA
lizeth Aguilar4 days ago
Final Answer :
C
Explanation :
An increase in the inflation rate in the US compared to China would cause the demand for US dollars to decrease as investors may prefer to hold the currency of the country with a lower inflation rate. This would result in a decrease in the demand for dollar, and since the supply of dollar remains the same, the supply for dollar would increase. Thus, the correct answer is C.
Learning Objectives
- Apprehend the influence that differing inflation rates between two economies have on currency supply and demand dynamics.
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