If a country has a high rate of inflation relative to the United States, the dollar will buy:
A) less of the foreign currency over time.
B) more of the foreign currency over time.
C) the same amount of the foreign currency over time.
D) an amount of foreign currency determined by the real exchange rate.

Question

Quizplus · Accepted Answer

When a country experiences a high rate of inflation relative to the United States, the value of its currency tends to decrease in comparison to the US dollar. This means that over time, the US dollar will be able to buy more of the foreign currency.

If a Country Has a High Rate of Inflation Relative