Suppose that the US and Europe maintain a fixed exchange rate between themselves.If inflation in the US is 3% and in Europe it is 1%,what would happen to the trade balances between these two countries? Could these countries maintain their fixed exchange rates forever? Why or why not?

Question

Quizplus · Accepted Answer

The Answer of Suppose that the US and Europe maintain a fixed exchange rate between themselves.If inflation in the US is 3% and in Europe it is 1%,what would happen to the trade balances between these two countries? Could these countries maintain their fixed exchange rates forever? Why or why not?

Suppose That the US and Europe Maintain a Fixed Exchange