?

AP® Macroeconomics

Free Version

Upgrade subject to access all content

Difficult

Inflation Rate Effect on Foreign Exchange

APMACR-7RBFIO

If the inflation rate in Argentina is very high compared to the inflation rate in all countries Argentina trades with, which of the following will happen to the value of Argentina's currency in the foreign exchange market?

A

The supply curve for Argentina's currency will shift right, and its currency will appreciate.

B

The supply curve for Argentina's currency will shift left, and its currency will depreciate.

C

The demand curve for Argentina's currency will shift right, and its currency will appreciate.

D

The demand curve for Argentina's currency will shift left, and its currency will depreciate.

E

There will be no shift in the demand or supply curves for Argentina's currency, and the international value of its currency will not change in value.