According to the purchasing-power-parity theory,the U.S.dollar maintains its purchasing-power parity if it depreciates by an amount equal to the excess of:
A) U.S.interest rates over foreign interest rates
B) Foreign interest rates over U.S.interest rates
C) U.S.inflation over foreign inflation
D) Foreign inflation over U.S.inflation

Question

Quizplus · Accepted Answer

Purchasing-power-parity theory suggests that exchange rates adjust to offset differences in inflation rates between countries. If U.S. inflation is higher than foreign inflation, the U.S. dollar should depreciate to maintain purchasing power parity.

According to the Purchasing-Power-Parity Theory,the U