If inflation rates in Norway accelerate relative to inflation rates in Malaysia then the Malaysian ringgit will _____ and the Norwegian krone will _____.
A) depreciate, appreciate
B) appreciate, appreciate
C) depreciate, depreciate
D) appreciate, depreciate
E) depreciate, stay the same

Question

Quizplus · Accepted Answer

When inflation rates in Norway accelerate relative to those in Malaysia, the value of the Norwegian krone is expected to decrease (depreciate) because higher inflation reduces a currency's purchasing power. Conversely, the Malaysian ringgit will appreciate as it becomes stronger relative to the krone, making Malaysian goods and services more expensive for Norwegians and Norwegian goods and services cheaper for Malaysians.

If Inflation Rates in Norway Accelerate Relative to Inflation Rates