The PPP theory argues that the exchange rate will change even if relative prices remain unchanged.

Name: The PPP theory argues that the exchange rate will change even if relative prices remain unchanged.
Brand: Quizplus
Rating: 4.8 (57 reviews)

Question

Quizplus · Accepted Answer

The Purchasing Power Parity (PPP) theory suggests that exchange rates should adjust to equalize the price of identical goods and services in different countries, meaning they change when relative prices change, not when they remain unchanged.

The PPP Theory Argues That the Exchange Rate Will Change