One theory states that changes in the exchange rate reflect changes in the price levels of two countries.What is the name of this theory?

Question

Quizplus · Accepted Answer

The theory mentioned in the question is the purchasing power parity theory, which suggests that changes in exchange rates between two countries should over time adjust to reflect the changes in the price level differences between those two countries. A correct answer choice would be D: the purchasing power parity theory.

One Theory States That Changes in the Exchange Rate Reflect