If Inflation in Country a Exceeds Inflation in Country B

question 87

Multiple Choice

If inflation in country A exceeds inflation in country B, purchasing power parity implies that:

• A)The currency of country B should depreciate relative to the currency of country A
• B)The inflation rate in country B will rise to match the inflation rate in country A
• C)The currency of country A will depreciate relative to the currency of country B
• D)The inflation rate in country A will fall to match the inflation rate in country B

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Definitions:

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