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Taking into consideration US vs China, and assume they have the same annual inflation rate of 2%. How will the trade bet...

Taking into consideration US vs China, and assume they have the same annual inflation rate of 2%. How will the trade between US and China be impacted if the inflation rate in US goes up to about 3.5%?

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Answer #1

Inflation rate decides the competitiveness of country. US inflation rate is larger than the one prevailing in china. Thus export of US is likely to fall. So there will be rise in export of china. Thus there will be depreciation of dollar.

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