According to purchasing power parity,which of the following is FALSE about an overvalued dollar compared to the Japanese yen?
A)U)S. merchants would be motivated to import more Japanese goods.
B)Japanese merchants would tend to export more to the United States.
C)Prices in the United States would tend to fall.
D)Over the long term, the exchange rate would fall.

Question

Quizplus · Accepted Answer

According to purchasing power parity, an overvalued currency should eventually adjust back to its fair value. Therefore, over the long term, the exchange rate would be expected to fall.

According to Purchasing Power Parity,which of the Following Is FALSE