If the home inflation rate is 5% and the foreign inflation rate is 5%, then by relative purchasing power parity the home country would expect is exchange rate to:

Question

Quizplus · Accepted Answer

According to relative purchasing power parity, if both countries have the same inflation rate, then there should be no change in the exchange rate. In this case, both home and foreign countries have a 5% inflation rate, so the exchange rate should have no change in its value.

If the Home Inflation Rate Is 5% and the Foreign