Suppose that over the past decade, U.S. inflation is less than that in Mexico. Further assume that during this same period, the dollar depreciates relative to the Mexican peso. Given this information,
A) the real exchange rate remains unchanged.
B) the real exchange rate must decrease.
C) the real exchange rate must increase.
D) the real exchange rate can increase or remain the same, but not decrease.
E) the real exchange rate can decrease or remain the same, but not increase.
B
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