Suppose that U.S.and British inflation rates are equal,and $2 exchanges for 1 British pound.Then if U.S.inflation slows down relative to British inflation,the PPP theory predicts ________ of the dollar,so that the pound will cost ________ than $2.

Question

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According to the Purchasing Power Parity (PPP) theory, if U.S. inflation slows down relative to British inflation, the value of the dollar will increase relative to the pound. This means the dollar will appreciate, and as a result, it will cost less than $2 to buy one British pound.

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