If inflation is greater in Mexico by 10% than it is in the rest of the world then the purchasing power parity theory predicts that the

Question

Quizplus · Accepted Answer

According to the purchasing power parity theory, countries with higher inflation rates will experience a depreciation in their currency to maintain the same purchasing power relative to other countries. Therefore, the Mexican peso would depreciate by approximately 10% to offset the higher inflation rate when compared to the rest of the world.

If Inflation Is Greater in Mexico by 10% Than It