Other things the same,according to purchasing-power parity,if over the next few years Mexico has a higher money supply growth rate than the U.S. ,then
A)prices in Mexico will rise by a larger percentage than in the U.S.So,the dollar will appreciate against the Mexican peso.
B)prices in Mexico will rise by larger percentage than in the U.S.So,the dollar will depreciate against the Mexican peso.
C)prices in Mexico will rise by a smaller percentage than in the U.S.So,the dollar will appreciate against the Mexican peso.
D)prices in Mexico will rise by a smaller percentage than in the U.S.So,the dollar will depreciate against the Mexican peso.

Question

Quizplus · Accepted Answer

According to purchasing-power parity, if Mexico has a higher money supply growth rate than the U.S., prices in Mexico will rise faster than in the U.S. This will lead to the depreciation of the Mexican peso relative to the U.S. dollar, meaning the dollar will appreciate against the peso.

Other Things the Same,according to Purchasing-Power Parity,if Over the Next