If prices in Thailand rise less than prices in the United States, then according to the doctrine of purchasing-power parity the U.S. nominal exchange rate should rise.

Question

Quizplus · Accepted Answer

According to purchasing-power parity, if prices in one country rise less than prices in another country, the nominal exchange rate of the country with rising prices should weaken to maintain the same purchasing power. Therefore, if prices rise less in Thailand than in the United States, the U.S. nominal exchange rate should weaken, not rise.

If Prices in Thailand Rise Less Than Prices in the United