Macroeconomics + Economy 2009 Update 18th Edition by Campbell McConnell, Sean Masaki Flynn,Stanley Brue

Exercise 15

"A rise in the dollar price of yen necessarily means a fall in the yen price of dollars." Do you agree Illustrate and elaborate: "The critical thing about exchange rates is that they provide a direct link between the prices of goods and services produced in all trading nations of the world." Explain the purchasing-power-parity theory of exchange rates.