If the GDP deflator in the United States is 114,and the GDP deflator in Ukraine is 142,which of the following changes would the theory of purchasing power parity predict? (The Ukrainian currency is the hryvnia.)
A) The demand for the dollar will rise since the dollar is undervalued.
B) The demand for the dollar will fall since the dollar is overvalued.
C) The supply of the dollar will fall since the dollar is undervalued.
D) No prediction regarding changes in the demand or supply of the dollar can be made without information on the exchange rate between the United States and Ukraine.
Correct Answer:
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