The Pacto plan reduced inflation; however, the nominal exchange rate-based stabilization resulted in:
A) real depreciation of the peso.
B) nominal depreciation of the peso.
C) real appreciation of the peso.
D) nominal appreciation of the peso.

Question

Quizplus · Accepted Answer

The nominal exchange rate-based stabilization often leads to real appreciation of the currency because the nominal exchange rate is fixed or stabilized while domestic prices continue to rise, making the real exchange rate appreciate.

The Pacto Plan Reduced Inflation; However, the Nominal Exchange Rate-Based