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Question
The empirical evidence on purchasing power parity seems to point out that:A. purchasing power parity can explain long run movements in exchange rates but does not hold up to scrutiny for short-run changes.
B. purchasing power parity does a good job of explaining short-run movements in exchange rates, but does not hold up to scrutiny over the long run.
C. purchasing power parity is a good theory for international trade, but is of little use in explaining exchange rate movements.
D. inflation and a country's rate of currency appreciation are positively correlated.
Answer
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