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Question
Assume that the U.S. has an 8 percent inflation rate while Mexico has a 4 percent inflation rate. According to relative PPP, the dollar would be expected to:
a. Appreciate by 2 percent against the Mexican peso.
b. Depreciate by 2 percent against the Mexican peso.
c. Appreciate by 4 percent against the Mexican peso.
d. Depreciate by 4 percent against the Mexican peso.
Answer
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Related questions
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