Economics · International Finance
According to the Purchasing Power Parity (PPP) theory, which statement is correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Exchange rates should equal the ratio of price levels between countries in the long run✓
- 2Exchange rates should be fixed by international agreement
- 3Capital flows determine exchange rates exclusively
- 4Exchange rates are determined by interest rate differentials
Correct answer
Exchange rates should equal the ratio of price levels between countries in the long run
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