Question

Why should you care about inflation?

A. It affects your purchasing power

      B. It affects the monthly payment on a fixed-rate mortgage

       C. It affects the monthly payment on a fixed rate car loan

       D. All of the above

When the value of the U.S. dollar rises, what does that mean for your personal finances?

A. Overseas travel is less expensive

B. Imported goods are cheaper

C. Your foreign investments are worth less

D. All of the above

Answer 1

The answer for both of the question is

All of the above.

Explanation:

Question 1:

Inflation is the the economic term that describes an increase in general price level and decrease in the value of currency.

As the general price level increases purchasing power of currency decreases.

As the the value of currency decreases it affects the real rate of return on an investment or payment in case of a loan. Hence both of monthly payment on a fixed rate mortgage and car loan are affected. The payments are fixed and the value of currency has changed.

Question 2:

An appreciation of US dollar or an increase in the value of US dollar makes foreign currency cheaper or devaluation of foreign currency.

As US dollar increases in the value, the foreign goods or imports become cheaper, overseas travels becomes less expensive, one needs to pay a less for foreign goods and services.

As US dollar appreciated and foreign currency depreciated, foreign investments become less valuable.i.e. foreign investments are now in the form of a weaker currency.