According to the Theory of 'Purchasing Power Parity', the Foreign

Multiple Choice

According to the theory of 'purchasing power parity', the foreign exchange market will:

A) no longer demand Australian dollars if the inflation rate in Australia is higher than the inflation rates in other countries.
B) undervalue the Australian dollar if inflation in Australia is higher than the inflation rates in other countries.
C) adjust the value of currencies to reflect differing inflation rates between countries.
D) result in an increase in the supply of dollars whenever Australia's inflation rate is lower than the inflation rates in other countries.