Holding other things constant,increases in the price level in the US will
A)Cause the dollar to appreciate
B)Cause the dollar to depreciate
C)Does not affect the dollar value
D)None of the above

Question

​Holding other things constant,increases in the price level in the US will
A)​Cause the dollar to appreciate
B)Cause the dollar to depreciate
C)Does not affect the dollar value
D)​None of the above

Quizplus · Accepted Answer

An increase in the price level in the US typically leads to inflation, which reduces the purchasing power of the dollar. As a result, foreign investors and traders may demand fewer dollars, causing a decrease in the demand for the US currency and hence, a depreciation of the dollar's value relative to other currencies.

​Holding Other Things Constant,increases in the Price Level in the US

Holding Other Things Constant,increases in the Price Level in the US