Asked by Aleksandr Larion on Sep 24, 2024
Verified
Holding other things constant,decreases in the price level in the US will
A) Cause the dollar to appreciate
B) Cause the dollar to depreciate
C) Does not affect the dollar value
D) None of the above
Price Level
The standard price level for a wide array of goods and services in the economic sector, averaged out.
Dollar Appreciate
The increase in the value of the U.S. dollar relative to other currencies.
Dollar Depreciate
A decline in the value of the US dollar relative to other currencies, leading to decreased purchasing power internationally.
- Grasp the concept of purchasing power parity and its implications on currency value relative to inflation and price levels across countries.
Verified Answer
RM
Rekha Mukesh5 days ago
Final Answer :
A
Explanation :
When the price level decreases, the purchasing power of the dollar increases, making US goods less expensive relative to other countries. This leads to an increase in demand for US goods, and therefore an increase in demand for dollars to purchase those goods. This increased demand for dollars causes the value of the dollar to appreciate.
Learning Objectives
- Grasp the concept of purchasing power parity and its implications on currency value relative to inflation and price levels across countries.
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