Holding other things constant,an increase in the inflation rate in US compared to the Chinese economy may cause the demand for dollar to _____________ and the supply for dollar to __________.
A)Increase;decrease
B)Increase,increase
C)Decrease;Increase
D)Decrease;Decrease

Question

Quizplus · Accepted Answer

An increase in the inflation rate in the US compared to China will lead to a decrease in the demand for the dollar as people will want to hold their money in currencies with lower inflation rates. This will result in a decrease in demand and an increase in the supply of the dollar.

Holding Other Things Constant,an Increase in the Inflation Rate in US