Which of the following statements about purchasing power parity (PPP) is true?
A) If PPP always holds, then the differences in interest rates across countries can be explained by differences in inflation rates.
B) PPP states that the current forward rate must be an unbiased predictor of the expected future spot rate.
C) PPP implies that expected inflation rates should be the same across countries.
D) PPP implies that nominal interest rates should be the same across countries.
Correct Answer:
Verified
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