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The change in the Dollar price of a basket of goods and services in the US is also the inflation ...

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The change in the Dollar price of a basket of goods and services in the US is also the inflation ...

The change in the Dollar price of a basket of goods and services in the US is also the inflation rate in the US. Similarly, the change in the Yuan prices of goods and services in China is the inflation rate in China. If the nominal exchange rate between the Dollar and Yuan were fixed, and inflation in China were higher than of inflation in the US, what would happen to the overall real exchange rate for the Unites States and China?

▸ It would stay the same.

▸ It would first increase then decrease.

▸ It would increase.

▸ It would decrease.

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Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

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