Foreign Exchange Market and Currency Depreciation

Compensating for a Nation's High Inflation Rate

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Question

A(n) ________ in a nation's currency in the foreign exchange market compensates for the nation's high ________ rate.

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A. B. C. D. E.

C

Exchange rate adjustments permit nations with even high rates of inflation to engage in trade with countries experiencing relatively stable prices. A depreciation in a nation's currency in the exchange market compensates for the nation's inflation rate.