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If,in the Long Run,the Purchasing Power Parity Theory Held True

Question 20

Multiple Choice

If,in the long run,the purchasing power parity theory held true for two countries,what would we expect of the exchange rate for each of these two countries?


A) They would be proportionate to the relative price levels in the two countries.
B) They would be at par.
C) They would be unpredictable given the information provided.
D) They would be gradually decrease.

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