________ is a theory relating the expected adjustment needed in the future spot exchange rate between countries to the inflation rate in each economy.

Question

Quizplus · Accepted Answer

Purchase Power Parity (PPP) is the theory that in the long run, exchange rates should adjust so that an identical good in two different countries will have the same price when expressed in a common currency. This adjustment is based on the relative inflation rates of the two countries.

________ Is a Theory Relating the Expected Adjustment Needed in the Future