According to the Theory of Purchasing Power Parity, Whenever a Country's

question 80

Multiple Choice

According to the theory of purchasing power parity, whenever a country's price level is expected to fall relative to another country's price level,

• A)its currency's real exchange rate relative to the other country's currency should rise.
• B)its currency should depreciate relative to the other country's currency.
• C)its currency should appreciate relative to the other country's currency.
• D)its nominal interest rate should rise relative to the other country's nominal interest rate.