According to the absolute PPP theory,which of the following would occur if the price level in the US increases relative to the UK,and before this increase the dollar was in exchange rate equilibrium with the sterling?

Question

Quizplus · Accepted Answer

According to absolute PPP theory, if the price level in one country increases relative to another country, the currency of the country with the higher price level will depreciate, making its imports cheaper. Therefore, if the price level in the US increases relative to the UK, the dollar will depreciate, making imports from the UK cheaper for the US.

According to the Absolute PPP Theory,which of the Following Would