If the Home Inflation Rate Is 5% and the Foreign

question 14

Multiple Choice

If the home inflation rate is 5% and the foreign inflation rate is 5%, then by relative purchasing power parity the home country would expect is exchange rate to:

• A)rise in value by 5%.
• B)fall in value by 5%.
• C)have no change in its value.
• D)fall in value by 10%.