Exchange rate shocks are accompanied by ____ rates of inflation and ____ real GDP.
A) low, low
B) low, high
C) high, high
D) high, low
E) low, moderate

Question

Quizplus · Accepted Answer

Exchange rate shocks typically lead to higher rates of inflation due to the higher cost of imported goods, and lower real GDP as exports become more expensive for foreign buyers. Therefore, option D (high inflation rates, low real GDP) is the best choice.

Exchange Rate Shocks Are Accompanied by ____ Rates of Inflation