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Q. What are the predictions of the PPP theory with regard to the real exchange rates?
Answer: The real exchange rate among two countries is a broad summary measure of the prices of one country's goods and services relative to the other's. PPP predicts that the actual exchange rate never permanently changes which is different from nominal exchange rates that deal with the relative price of two currencies
Q. Why is it useful to make a distinction between debt and equity instruments? Answer: Debt instruments such as bank deposits and bonds are repaid regardless of econo
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