_____ purchasing power parity states that the difference between changes over time in product-price levels in two countries will be offset by the change in the exchange rate over this time.

Question

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Relative purchasing power parity (PPP) states that changes in the exchange rate between two countries will equal the difference in inflation rates between the two countries. This means that if one country experiences a higher level of inflation than another over a period of time, the currency of the country with higher inflation will depreciate in relation to the other country's currency. As a result, the prices of products in the two countries will be equalized, taking into account currency exchange rates. Full and partial PPP do not take into account all factors that may influence price levels, while absolute PPP assumes that prices are identical across countries, which is rarely the case.

_____ Purchasing Power Parity States That the Difference Between Changes