You hold currency from a foreign country. If that country has a lower rate of inflation than the United States, then over time the foreign currency will buy
A)fewer goods in that country and buy fewer dollars.
B)fewer goods in that country but buy more dollars.
C)more goods in that country but buy fewer dollars.
D)more goods in that country and buy more dollars.

Question

Quizplus · Accepted Answer

A lower rate of inflation in a foreign country compared to the United States means the purchasing power of the foreign currency increases relative to the U.S. dollar. This leads to the foreign currency buying more goods in its own country and more dollars in the exchange market.

You Hold Currency from a Foreign Country