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If U.S. inflation is 2%, Japanese inflation is 1%, and Mexican inflation is 3%, which of the following is TRUE according to the theory of purchasing power parity?
A) The dollar should rise by 1% versus the yen and fall by 1% versus the peso.
B) The dollar should rise by 1% versus the peso and fall by 1% versus the yen.
C) The dollar should rise by 1% versus both the peso and the yen.
D) The dollar should fall by 1% versus both the peso and the yen.
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Money, Banking, and the Financial System

Money, Banking, and the Financial System


Edition: 3rd
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