If the inflation rate in New Zealand were to rise relative to the inflation rate in Russia, which of the following correctly explains what would happen to the exchange rate for the New Zealand dollar in terms of Russian rubles?

A) The rubles-per-dollar exchange rate would fall since the inflation decreases the supply of dollars and increases the demand for dollars.

B) The rubles-per-dollar exchange rate would rise since the inflation rate increases the supply of dollars and decreases the demand for dollars.

C) The rubles-per-dollar exchange rate would rise since the inflation decreases the supply of dollars and increases the demand for dollars.

D) The rubles-per-dollar exchange rate would fall since the inflation increases the supply of dollars and decreases the demand for dollars.

Answer rating: 100% (QA)

ANSWER B The rublesperdollar exchange rate would rise since the inflation rate increases the supply ... View the full answer