Under conditions of purchasing power parity (PPP), a country with a relatively _______ expected inflation rate will have its currency _______ relative to a country with a relatively _______ inflation rate.

Question

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Under purchasing power parity (PPP), a country with a higher expected inflation rate will see its currency depreciate relative to a country with a lower inflation rate. This is because higher inflation reduces a currency's purchasing power, making it less valuable compared to currencies of countries with lower inflation.

Under Conditions of Purchasing Power Parity (PPP), a Country with a Relatively