Between 1973 and 1999,annual inflation in developing nations that export mainly manufactured goods averaged 23%,while inflation averaged 59% in countries that export mainly raw materials.Other things being equal,the PPP theory would predict that,in the long run,the currencies of the raw materials exporting countries should have

Question

Quizplus · Accepted Answer

The Purchasing Power Parity (PPP) theory suggests that in the long run, currencies of countries with higher inflation rates should depreciate relative to countries with lower inflation rates. Therefore, based on the information given in the question, we can predict that the currencies of raw materials exporting countries (with an average inflation rate of 59%) should have depreciated relative to currencies of manufactured goods exporting countries (with an average inflation rate of 23%). Thus, the best answer is C - depreciated relative to the currencies of countries exporting manufactured goods.

Between 1973 and 1999,annual Inflation in Developing Nations That Export