The following is a graph of an index from 4/9/2018-7/3/018 that tracks the movement of 25 emerging market currencies relative to the U.S. dollar. The currencies include the Russian ruble, Mexican peso, Brazilian real, Chinese Yuan, Indian Rupee, etc. The graph illustrates a steady appreciation of the dollar against these 25 currencies: Apr 9, 2018 Apr 23, 2018 May 7, 2018 May 21, 2018 Jun 4, 2018 Jun 18, 2018 Jul 2, 2018 1,700.00 1,680.00 1,660.00 1,640.00 1,621.99 Question: In the short-run, where firms in those emerging markets can't adjust their purchasing habits with the U.S., what is likely to happen to the price level? O The price level and the inflation rate is likely to decline because imports from the U.S. are going to become much cheaper. This is due to the fact that the dollar has become much cheaper for these emerging markets. The price level is likely to fall because exports will increase dramatically for these countries. This is due to the fact that movements in a country's currency has a negligible impact on inflation. The price level and the inflation rate is likely to rise because imports from the U.S. are going to become much more expensive. This is due to the fact that the dollar has become much more expensive for these emerging markets. O The price level is unlikely to change because these countries will adapt to the new market conditions.
The following is a graph of an index from 4/9/2018-7/3/018 that tracks the movement of 25 emerging market currencies relative to the U.S. dollar. The currencies include the Russian ruble, Mexican peso, Brazilian real, Chinese Yuan, Indian Rupee, etc. The graph illustrates a steady appreciation of the dollar against these 25 currencies: Apr 9, 2018 Apr 23, 2018 May 7, 2018 May 21, 2018 Jun 4, 2018 Jun 18, 2018 Jul 2, 2018 1,700.00 1,680.00 1,660.00 1,640.00 1,621.99 Question: In the short-run, where firms in those emerging markets can't adjust their purchasing habits with the U.S., what is likely to happen to the price level? O The price level and the inflation rate is likely to decline because imports from the U.S. are going to become much cheaper. This is due to the fact that the dollar has become much cheaper for these emerging markets. The price level is likely to fall because exports will increase dramatically for these countries. This is due to the fact that movements in a country's currency has a negligible impact on inflation. The price level and the inflation rate is likely to rise because imports from the U.S. are going to become much more expensive. This is due to the fact that the dollar has become much more expensive for these emerging markets. O The price level is unlikely to change because these countries will adapt to the new market conditions.
Chapter1: Making Economics Decisions
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Problem 1QTC
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Transcribed Image Text:The following is a graph of an index from 4/9/2018-7/3/018 that tracks the movement of 25
emerging market currencies relative to the U.S. dollar. The currencies include the Russian ruble,
Mexican peso, Brazilian real, Chinese Yuan, Indian Rupee, etc. The graph illustrates a steady
appreciation of the dollar against these 25 currencies:
Apr 9, 2018
Apr 23, 2018 May 7, 2018 May 21, 2018
Jun 4, 2018 Jun 18, 2018 Jul 2, 2018
1,700.00
1,680.00
1,660.00
1,640.00
1,621.99
Question:
In the short-run, where firms in those emerging markets can't adjust their purchasing habits with the
U.S., what is likely to happen to the price level?
The price level and the inflation rate is likely to decline because imports from the U.S. are going to become
much cheaper. This is due to the fact that the dollar has become much cheaper for these emerging markets.
The price level is likely to fall because exports will increase dramatically for these countries. This is due to the
fact that movements in a country's currency has a negligible impact on inflation.
The price level and the inflation rate is likely to rise because imports from the U.S. are going to become much
more expensive. This is due to the fact that the dollar has become much more expensive for these emerging
markets.
O The price level is unlikely to change because these countries will adapt to the new market conditions.
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