Assume that Canada and Britain have flexible exchange rates.If the price level is stable in Canada,but Britain experiences rapid inflation,what could we expect?

Question

Quizplus · Accepted Answer

When Britain experiences rapid inflation compared to Canada, the value of the British pound is likely to decrease or depreciate in comparison to the Canadian dollar. This is because the purchasing power of the pound decreases relative to the Canadian dollar, making British goods and services relatively cheaper and Canadian goods and services relatively more expensive.

Assume That Canada and Britain Have Flexible Exchange Rates