Asked by Bertrand Veronique on May 26, 2024
Verified
Assume that the inflation rate in Canada is 3% over the next four years while the rate in the U.S. is 4% for the same time period. Given this, the U.S. dollar will depreciate relative to the Canadian dollar.
Inflation Rate
The pace at which the aggregate price level of commodities and services ascends, reducing the value of money.
Depreciate
A decrease in the value of an asset over time, often due to wear and tear or obsolescence, recognized in accounting to spread the cost of an asset over its useful life.
Canadian Dollar
The official currency of Canada, represented by the symbol CAD or C$.
- Understand the impacts of inflation on currency value and exchange rates.
Verified Answer
AC
Andres CortesMay 29, 2024
Final Answer :
True
Explanation :
Higher inflation rates in a country tend to decrease the value of its currency relative to currencies of countries with lower inflation rates, because purchasing power decreases with higher inflation.
Learning Objectives
- Understand the impacts of inflation on currency value and exchange rates.