A depreciation of a country's currency always lowers the domestic ...

[Yi-Chen]

A depreciation of a country's currency always lowers the domestic firm's profits.
 
  Indicate whether the statement is true or false

Question 2

Last year, the unemployment rate was 4 percent and the inflation rate was 3 percent. If the natural rate of unemployment is 3 percent, how do you expect inflation to change?
 
  What will be an ideal response?

[Christopher]

Answer to Question 1

FALSE

Answer to Question 2

Inflation is only stable when the unemployment rate is equal to the natural rate of unemployment. Since last year's unemployment rate was above the natural rate of unemployment, the inflation rate will eventually increase as the economy moves up the short-run Phillips curve.

[Yi-Chen]

Thank you

[Christopher]

No problemo