Differences in prices between two countries explain exchange rate movements in the long run.

Name: Differences in prices between two countries explain exchange rate movements in the long run.
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Question

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According to the theory of purchasing power parity, in the long run, exchange rates will adjust to equalize the prices of identical goods and services in different countries. This means that differences in prices between two countries can explain exchange rate movements in the long run.

Differences in Prices Between Two Countries Explain Exchange Rate Movements