According to the theory of purchasing power parity

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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? 2. The Big Mac Price Index computed by the Economist has consistently found the U.S. dollar to be undervalued against some currencies and overvalued against others, which seems to call for a rejection of the purchasing power parity theory. Explain why the index may not be a valid test of the theory

Reference no: EM13978279

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