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a. According to the purchasing power parity (PPP) condition, what is the relationship between changes in price levels between two countries and changes in their nominal exchange rates?

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Related questions

Discuss the differences between Absolute purchasing power parity and relative purchasing power parity. Explain why relative PPP is useful when comparing countries that base their price levels on different product baskets.

According to the theory of purchasing power parity (PPP), what will happen to the value of the dollar (against foreign currencies) if the U.S. price level doubles and price levels in other countries remain constant? Why is the theory more suitable to analyzing events in the long run?

Critically discuss in your own words the theory of Purchasing Power Parity (PPP), noting the difference between absolute purchasing power parity, relative purchasing power parity. As part of your discussion state whether PPP is useful in practice and why, drawing on your understanding of the Big Mac Index.

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