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    Principles of Macroeconomics Study Set 12
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    Exam 19: Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates
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    Purchasing Power Parity Theory Holds That Exchange Rates Are Set
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Purchasing Power Parity Theory Holds That Exchange Rates Are Set

Question 222

Question 222

True/False

Purchasing power parity theory holds that exchange rates are set so that the price of similar goods in different countries reflects the relative interest rates in those countries.

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