Which of the following is TRUE about Purchasing Power Parity (PPP) theory states? ...
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Finance
Which of the following is TRUE about Purchasing Power Parity (PPP) theory states?
a. the exchange rate between currencies of two countries should be equal to the ratio of the countries' price levels.
b. the prices of standard commodity baskets in two countries are not related.
c. the exchange rate between currencies of two countries should be equal to the ratio of the countries' price levels, and as the purchasing power of a currency sharply declines (due to hyperinflation) that currency will depreciate against stable currencies.
d. as the purchasing power of a currency sharply declines (due to hyperinflation) that currency will depreciate against stable currencies.
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