If purchasing-power parity holds,when a country's central bank increases the money supply,a unit of money
A)gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
B)gains value in terms of the domestic goods and services it can buy,but loses value in terms of the foreign currency it can buy.
C)loses value in terms of the domestic goods and services it can buy,but gains value in terms of the foreign currency it can buy.
D)loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.

Question

Quizplus · Accepted Answer

Increasing the money supply typically leads to inflation, reducing the value of money domestically and causing depreciation in foreign exchange markets, thus reducing its value in terms of foreign currency.

If Purchasing-Power Parity Holds,when a Country's Central Bank Increases the Money