Since 1942, the small country of Panama has had no paper currency other than the United States dollar, which circulates freely internally. What would you expect to be true about the inflation rate in...


Since 1942, the small country of Panama has had no paper currency other than the United States dollar, which circulates freely internally. What would you expect to be true about the inflation rate in Panama compared to that in the United States, and why? Go to the International Monetary Fund’s most recent World Economic Outlook database (accessible directly or through www.imf.org) and examine comparable consumer-price inflation rates for Panama and the United States? Do the inflation rates you see there conform to your earlier prediction? (After you have read Chapters 16 and 18, you should return to this question as you will then have a deeper understanding of the factors that determine the price level in a country like Panama.)

Nov 20, 2021
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