Assume that Brazil and Mexico have floating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inflation,

Question

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When a country experiences rapid inflation while another country maintains stable prices, the currency of the country with inflation tends to depreciate in value compared to the currency of the country with stable prices. This is because the purchasing power of the inflating currency decreases relative to the other currency.

Assume That Brazil and Mexico Have Floating Exchange Rates