According to purchasing power parity (PPP), if a foreign country's inflation rate is below the inflation rate at home, home country consumers will increase their imports from the foreign country and foreign consumers will lower their demand for home country products. These market forces cause the foreign currency to appreciate.

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According to PPP, if a foreign country's inflation rate is lower than the home country's inflation rate, its currency will appreciate as the demand for its goods increases, and foreign countries will purchase more of its goods.

According to Purchasing Power Parity (PPP), If a Foreign Country's