The purchasing-power-parity theory holds that exchange rates should equalize the inﬂation rates
among the trading nations.

Name: The purchasing-power-parity theory holds that exchange rates should equalize the inﬂation rates among the trading nations.
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Question

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The purchasing-power-parity (PPP) theory holds that exchange rates should adjust to equalize the price of identical goods and services in different countries, not specifically to equalize inflation rates among trading nations.

The Purchasing-Power-Parity Theory Holds That Exchange Rates Should Equalize the Inﬂation