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

Name: If the United States has inflation of 3% and Europe has inflation of 5%, the value of the euro should increase, ceteris paribus.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The currency with higher inflation typically decreases in value relative to the currency with lower inflation. Therefore, in this scenario, the value of the euro should decrease relative to the U.S. dollar, not increase.

If the United States Has Inflation of 3% and Europe