If people expect that their future purchasing power will decline, what will happen to the exchange rate today?

What will be an ideal response?

Answer: Typically, when people think that the purchasing power of a money is going to decline in the future, due to higher expected inflation, they try to sell that currency today to get into a currency that will have more stable purchasing power. This reduced demand for the currency causes that currency to weaken or depreciate immediately.

Business

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Why would a firm ever forgo a positive NPV project? How can hedging help prevent this situation from arising?

What will be an ideal response?

Business

A cost is a resource sacrificed or forgone to achieve a specific objective

Indicate whether this statement is true or false.

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