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If the Price Level Goes Up in Country 1 by the Same

question 6

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If the price level goes up in country 1 by the same rate it increases in country 2, what happens to the exchange rate according to PPP?


Definitions:

SSE

SSE, or Sum of Squares Error, is a measure used in statistics to describe the amount of variation or deviation of sample values from the fitted values in a model.

F Statistic

The F statistic is used in statistical testing to compare the variances among group means to decide if they significantly differ from each other.

Two-Way ANOVA

A statistical test used to determine the effect of two nominal predictor variables on a continuous outcome variable.

Interaction

A statistical term describing a situation in which the effect of one explanatory variable on the response variable depends on the level of another explanatory variable.

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