Research has shown that the inflation in a country is:
A) always high if there is a fixed exchange rate.
B) always low if there is a flexible exchange rate.
C) not dependent on the choice of exchange rate regime.
D) higher in developing countries coming out of hyperinflation.

Question

Quizplus · Accepted Answer

Although exchange rate regime can affect the level and volatility of inflation, there is no definitive evidence to suggest that one particular regime consistently leads to higher or lower inflation. The inflation level and volatility depend on various factors such as the monetary policy stance, productivity growth, and supply shocks.

Research Has Shown That the Inflation in a Country Is