Assume the spot exchange rate is 6.22 Chinese yuan per U.S.dollar.If the inflation rate in China is expected to be double that in the U.S.for the next 2 years,then the
A) exchange rate will be unaffected as inflation is irrelevant to exchange rates.
B) dollar will weaken against the yuan.
C) yuan will appreciate relative to all other currencies.
D) dollar will remain constant against the yuan.
E) dollar will strengthen against the yuan.
Correct Answer:
Verified
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