If the United States has inflation of 3 percent and Europe has inflation of 5 percent,the value of the euro should increase,ceteris paribus.

Question

Quizplus · Accepted Answer

Inflation rates are only one factor that can influence exchange rates, and other factors such as interest rates, political stability, and economic growth can have a greater impact. Therefore, it cannot be assumed that the value of the euro will increase solely based on this comparison of inflation rates between the US and Europe.

If the United States Has Inflation of 3 Percent and Europe