According to the Theory of Purchasing Power Parity, If the Price

question 62

Multiple Choice

According to the theory of purchasing power parity, if the price level in France rises by 6 percent and the price level in the United States rises by 4 percent, then the dollar will

• A) appreciate by 2 percent against the euro in the short run.
• B) depreciate by 2 percent against the euro in the short run.
• C) appreciate by 2 percent against the euro in the long run.
• D) depreciate by 2 percent against the euro in the long run.

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