Changes in currency values and inflation rates

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1. What does it mean to say that a currency trades at a forward premium?

2. Explain how the law of one price establishes a relationship between changes in currency values and inflation rates.

3. Why does purchasing power parity appear to hold in the long run but not in the short run?

Reference no: EM131316749

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Changes in currency values and inflation rates : What does it mean to say that a currency trades at a forward premium?- Explain how the law of one price establishes a relationship between changes in currency values and inflation rates.
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