Under adjustable pegged exchange rates,if the rate of inflation in the United States exceeds the rate of inflation of its trading partners:
A) U.S.exports tend to rise and imports tend to fall
B) U.S.imports tend to rise and exports tend to fall
C) U.S.foreign exchange reserves tend to rise
D) U.S.foreign exchange reserves remain constant

Question

Quizplus · Accepted Answer

If the rate of inflation in the U.S. exceeds that of its trading partners, the U.S. dollar will be less competitive in the global market, resulting in a decline in exports and an increase in imports. The demand for foreign currencies to purchase these imported products would increase, resulting in a decrease in U.S. foreign exchange reserves. Therefore, option B is the correct answer.

Under Adjustable Pegged Exchange Rates,if the Rate of Inflation in the United