Prices of Imports and Exports in Two Countries: Impact of Rising Annual Rates

Prices of Imports and Exports

Prev Question Next Question

Question

If prices in two countries are rising at the same annual rate, then the prices of imports and exports will:

Answers

A. increase in the country with the more valuable currency and decrease in the country with the less valuable currency.

B. increase relative to domestically produced goods.

C. decrease relative to domestically produced goods.

D. none of these answers.

E. remain unchanged relative to domestically produced goods.

Show Answer

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D. E.

If prices in two countries are rising at the same annual rate, then the prices of imports and exports will remain unchanged relative to domestically produced goods.

Equal rates of inflation in each of the countries will not cause the value of exports to change relative to imports.

Prev Question Next Question