Suppose that U.S.and British inflation rates are equal,and $2 exchanges for 1 British pound.Then if U.S.inflation speeds up 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 the U.S. inflation rate increases relative to the British inflation rate, the value of the dollar will depreciate relative to the pound. This means it will cost more dollars to buy one pound.

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