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What is the purchasing power parity theory

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1. What is the purchasing power parity theory. Is it a short-run or a long-run theory? Why may it not always work?

2. Suppose a basket of internationally traded goods that sells for $10,000 in the United States sells for €8,000 in the euro zone. According to purchasing power parity theory, the equilibrium exchange rate should be

Reference no: EM132299074

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