Other things remaining the same, higher the GDP deflator in USA,
A) higher is the real exchange rate of US dollar.
B) higher is the real exchange rate of Canadian dollar.
C) higher is the net export of USA.
D) higher is the price of Canadian of Canadian goods relative to the prices of US goods.

Question

Quizplus · Accepted Answer

A higher GDP deflator in the USA indicates higher domestic prices, which can lead to an appreciation of the real exchange rate of the US dollar, making US goods more expensive relative to foreign goods.

Other Things Remaining the Same, Higher the GDP Deflator in USA