If the dollar appreciates against the Australian dollar at a faster rate than the Australian inflation rate exceeds the U.S. rate, then the dollar would appear to be:
A) depreciated.
B) undervalued.
C) overvalued.
D) neither undervalued nor overvalued.
E) discounted by the market.

Question

Quizplus · Accepted Answer

If the dollar appreciates against the Australian dollar at a faster rate than the Australian inflation exceeds the U.S. inflation rate, it means the dollar is gaining value more quickly than can be justified by the relative inflation rates. This scenario typically leads to the currency being considered overvalued, as its market value is higher than what economic fundamentals would suggest.

If the Dollar Appreciates Against the Australian Dollar at a Faster