Which of the following is indicated by research regarding purchasing power parity (PPP)?

Question

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Research indicates that deviations from PPP are reduced in the long run. While PPP may not hold perfectly in the short run, it is believed to hold over longer periods of time as exchange rates adjust to reflect inflation differentials. Therefore, option B is the best choice. Option A is incorrect because PPP does not hold clearly in the short run. Option C is incorrect because PPP may not hold clearly in the long run. Option D is incorrect because there is a relationship between inflation differentials and exchange rate movements in the long run, which is what PPP is based on.

Which of the Following Is Indicated by Research Regarding Purchasing