The ______________ is less useful for predicting exchange movements between the currencies of advanced industrialized nation that have relatively small differentials in inflation rates.

Question

Quizplus · Accepted Answer

PPP theory, or purchasing power parity theory, states that the exchange rate between two countries should theoretically equalize the price levels of a basket of goods and services in each country. However, this theory is less reliable when comparing advanced industrialized nations that have similar inflation rates and price levels, as the differences are not significant enough to strongly influence exchange rate movements.

The ______________ Is Less Useful for Predicting Exchange Movements Between