If the price level rises in the United States but not in foreign nations and the current exchange rate does not change, the expected future exchange rate
A) rises.
B) falls.
C) stays the same.
D) is impossible to predict in terms of how it will change, from the information given.

Question

Quizplus · Accepted Answer

When the price level rises in the United States but not in foreign nations, U.S. goods become relatively more expensive compared to foreign goods. This makes U.S. exports less competitive and decreases demand for the dollar, leading to an expectation that the value of the dollar will fall in the future compared to foreign currencies.

If the Price Level Rises in the United States but Not