According to Purchasing Power Parity, the Foreign Exchange Market Will

question 440

Multiple Choice

According to purchasing power parity, the foreign exchange market will

• A) undervalue the dollar if inflation in the United States is greater than it is elsewhere.
• B) result in a flow of dollars out of the United States whenever its rate of inflation is below that of other nations.
• C) adjust the value of the exchange rate to reflect differing inflation rates between nations.
• D) no longer demand dollars if the inflation rate in the United States exceeds that of other nations.

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