Purchasing Power Parity Implies That If the Law of One

question 93

Multiple Choice

Purchasing Power Parity implies that if the law of one price holds at all times then

• A) differences in interest rates are associated with expected changes in exchange rates
• B) differences in expected inflation rates between two countries are associated with expected changes in exchange rates.
• C) Foreign exchange rates are fixed.
• D) neither a or b is correct

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