According to purchasing-power parity, when a country's central bank decreases the money supply, a unit of money

a. gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.

b. gains value in terms of the domestic goods and services it can buy, but loses value in terms of the foreign currency it can buy.

c. loses value in terms of the domestic goods and services it can buy, but gains value in terms of the foreign currency it can buy.

Question

Julian Stone

Business

5 June, 01:43

According to purchasing-power parity, when a country's central bank decreases the money supply, a unit of money

a. gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.

b. gains value in terms of the domestic goods and services it can buy, but loses value in terms of the foreign currency it can buy.

c. loses value in terms of the domestic goods and services it can buy, but gains value in terms of the foreign currency it can buy.

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Answers (1)

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Jane Morales · Answer 1

C

Explanation:

Because when money supply of money unit decreases, inflation decreases and the value of money increases in the international foreign trade