Question

#1. If one U.S. dollar equals one euro, which of these could result if the euro experiences inflation? E.U. citizens could purchase more goods in the U.S. for less money. /E.U. citizens would purchase large amounts of U.S. stock./ U.S. citizens would purchase more goods from the E.U. for less money./ U.S. citizens would purchase large amounts of E.U. stock. #2. Which of these statements is true?

Inflation means our money has more purchasing power. / Inflation happens when there is not enough money./Inflation is due to low production costs./ Inflation is problematic if unexpected.

Answer 1

If the euro experiences inflation, the U.S. dollar would go further in purchasing goods from the E.U. The true statement about inflation is that it is problematic if unexpected, due to its potential to redistribute purchasing power and cause economic disruptions.

Step-by-step explanation:

If one U.S. dollar equals one euro, and the euro experiences inflation, it would result in a scenario where the purchasing power of the euro declines compared to the dollar. Therefore, the correct outcome from the given options would be that U.S. citizens would purchase more goods from the E.U. for less money, since their dollars now have relatively more buying power compared to the euros.

As for the second question, the statement that is true is: Inflation is problematic if unexpected. Inflation implies a general rise in the level of prices, which leads to a decrease in purchasing power. This is particularly troublesome if it is unexpected because it can lead to unintended redistributions of purchasing power, blurred price signals, and difficulties in long-term planning.

In relation to relative inflation, when a country like the E.U. experiences higher inflation rates than others, its currency's value depreciates against those with lower inflation rates. An example can be drawn from the historical case of the Mexican peso, where inflation led to a dramatic decrease in purchasing power and a corresponding fall in the peso's exchange rate value.

Answer 2

The right answer for the question that is being asked and shown above is that: "E.U. citizens would purchase large amounts of U.S. stock."

The right answer for the question that is being asked and shown above is that: "Inflation happens when there is not enough money."