All else being constant,a currency should _______ if there is _______ in a country's inflationary expectations,relative to those in other countries.

Question

Quizplus · Accepted Answer

If a country's inflationary expectations increase relative to other countries, its currency will likely depreciate. This is because higher inflation expectations would decrease the purchasing power of the currency, making it less attractive to foreign investors and decreasing demand, which in turn lowers the exchange rate.

All Else Being Constant,a Currency Should _______ If There Is