If inflation in Country X is 2 percent and 3 percent in the United States, the dollar would______ power parity holds.?

Question

Quizplus · Accepted Answer

According to purchasing power parity, the currency of the country with lower inflation (Country X) should appreciate relative to the currency of the country with higher inflation (United States) by the difference in inflation rates, which is 1 percent. Hence, the dollar would depreciate by 1 percent.

If Inflation in Country X Is 2 Percent and 3