If the difference between the domestic inflation rate and the foreign inflation rate exceeds the percentage depreciation in the domestic currency, then relative purchasing power parity holds true.

Question

Quizplus · Accepted Answer

Relative Purchasing Power Parity (PPP) holds when the rate of depreciation of the domestic currency is equal to the difference between the domestic and foreign inflation rates, not when it exceeds this difference.

If the Difference Between the Domestic Inflation Rate and the Foreign