The theory which considers the change in exchange rate with the fluctuations in inflation rates is classified as __________?
Correct answer: B. purchasing power parity
- A. liquidated power parity
- B. purchasing power parity
- C. selling power parity
- D. volatile power parity
Explanation
Purchasing power parity links exchange-rate changes to differences in inflation rates between countries. The other phrases are not recognised exchange-rate theories.
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