Question: Assume that a floating exchange rate system exists between the United States and Brazil. Note that the currency of the United States is the U.S.
Assume that a floating exchange rate system exists between the United States and Brazil. Note that the currency of the United States is the U.S. dollar, while the currency of Brazil is the Brazilian real. Assume that the inflation rate becomes much higher in the United States, relative to the inflation rate in Brazil. Clearly explain how a floating exchange rate system between the United States and Brazil could compound the problem of high inflation in the United States. Use the countries given in the problem (the United States and Brazil) in your explanation. Clearly explain your logic, using graphs when necessary.
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