If the inflation rate in the United States is greater than the inflation rate in Britain,other things held constant,the British pound will
A) appreciate against the U.S.dollar.
B) depreciate against the U.S.dollar.
C) remain unchanged against the U.S.dollar.
D) appreciate against other major currencies.
E) appreciate against the dollar and other major currencies.

Question

Quizplus · Accepted Answer

When the inflation rate in the United States is higher than in Britain, it typically leads to the depreciation of the U.S. dollar relative to the British pound. This is because higher inflation in the U.S. decreases the purchasing power of the dollar, making British goods relatively cheaper and more attractive, thus increasing demand for the pound.

If the Inflation Rate in the United States Is Greater