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In the situation described in the above question, suppose that the Central Bank of Vietnam decides to keep the nominal dong-dollar exchange rate constant indefinitely. Given whatDEP Inc. has determined about the trend in the real exchange rates and assuming that the rate of inflation in the rest of the world remains unchanged, what should one expect to happen to the rate of inflation in Vietnam over the next several years compared to the past?

Respuesta :

osondumartins

Options:

a.The rate of inflation will rise.

b.The rate of inflation will decline.

c.The rate of inflation will remain unchanged.

d.The rate of inflation may rise or decline

Answer:b.The rate of inflation will decline.

Explanation:Fixed exchange rate is a term used in Economics to describe the "pegging" or fixes the amount to which its own currency will trade with a popular currency like the United States Dollar. This will give investors,importers and exporters more stability and confidence as they will not be scared of indiscriminate fluctuations. WITH THIS CONFIDENCE THE RATE OF INFLATION WILL DECLINE AS INVESTORS WILL NOT BE UNDER PRESSURE TO HOARD GOODS OR REDUCE THE VOLUME OF PRODUCTS RELEASED TO THE MARKET AND CONSUMERS WILL NOT BE UNDER PRESSURE TO BUY.

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