Relative purchasing power parity is based on the principle that the expected percentage change in the exchange rate between two countries is equal to which one of the following?
A) Difference in the risk-free interest rates in the two countries
B) Average interest rate in the two countries
C) Average inflation rate of the two countries
D) Difference in the inflation rates of the two countries
E) Difference between the two countries' average inflation and interest rates
Correct Answer:
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