Asked by
Latonya Dysart
on Dec 17, 2024Verified
If prices in Mexico rise at a higher rate than prices in the U.S., then according to purchasing-power parity the U.S. nominal exchange rate with Mexico should rise.
Purchasing-power Parity
An economic theory that compares different countries' currencies through a "basket of goods" approach to assess relative currency value and living standards.
Nominal Exchange Rate
The Nominal Exchange Rate is the rate at which one country's currency can be traded for another's, not adjusted for inflation, reflecting the current value of one currency compared to another.
Prices
The monetary value expected, demanded, or delivered in exchange for a good or service.
- Understand the impact of inflation on exchange rates and buying power within the global marketplace.
Verified Answer
HL
Learning Objectives
- Understand the impact of inflation on exchange rates and buying power within the global marketplace.