If Purchasing-Power Parity Holds but Then U

question 14

Multiple Choice

If purchasing-power parity holds but then U.S.prices rise,which of the following move the exchange rate back towards purchasing-power parity?

• A)foreign prices rise or the U.S.nominal exchange rate rises
• B)foreign prices rise or the U.S.nominal exchange rate falls
• C)foreign prices fall or the U.S.nominal exchange rate rises
• D)foreign prices fall or the U.S.nominal exchange rate falls

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Definitions:

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