Purchasing power parity states that:
A) interest rates must compensate for expected inflation.
B) the expected change in the exchange rate between two currencies is due to differences in expected inflation rates in the respective countries.
C) relative interest rates determine the relativity between the forward exchange rate and the spot exchange rate.
D) the expected change in the exchange rate is due to differences in expected interest rates in the respective countries.
Correct Answer:
Verified
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