Suppose that over the past decade,U.S.inflation is greater than that in Mexico.Further assume that during this same period,the dollar appreciates relative to the Mexican peso.Given this information,

Question

Quizplus · Accepted Answer

The real exchange rate increases when the home country's inflation rate is higher than the foreign country's inflation rate, and the home currency appreciates relative to the foreign currency. This is because the home goods become relatively more expensive compared to foreign goods.

Suppose That Over the Past Decade,U