If the rate of inflation in India increases relative to the rate of inflation in Canada, then which of the following will occur?
Tap an option to check your answer.
1 mark, −0.33International EconomicsBalance of payments and exchange ratesPurchasing power parityModerateabout 1 min
UoH 2018 Question 85: Balance of payments and exchange rates
Answer and worked solution
Checking your account…
Balance of payments and exchange rates has come up 120 times in 7 exams since 2007.
What this question tests
This question is on Purchasing power parity, part of Balance of payments and exchange rates in International Economics.
Whether exchange rates adjust to equalise price levels.
TestStop has 12 past-paper questions on this subtopic; the nearest in year are below.
Similar questions from other papers
- When there is no change in central banks holding of international reserves, a country's:
- Nominal exchange rate is defined as the amount of domestic currency that can fetch one unit of foreign currency. Suppose that there is a fall in nominal exchange rate.…
- Identify the CORRECT statement(s) in the context of an open economy.
- Devaluation of Currency has the following effects: A. Changes relative domestic price B. Increases the tax value of domestic currency C. Increases the competitiveness…
- Expenditure towards the maintenance of embassies and diplomatic missions are included in which of the following account of the balance of payments.
Question from the UoH 2018 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.