Suppose That a Currency's Value Is Found to Be Overvalued

question 72

Multiple Choice

Suppose that a currency's value is found to be overvalued by using purchasing power parity. Then

• A) the currency will depreciate in the future but we don't know when.
• B) we know when and how much the currency will depreciate.
• C) the interest rate in the country will change in order to restore purchasing power parity.
• D) the currency will appreciate in the future but we don't know when.
• E) we know when and how much the currency will appreciate.

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