Over the long run the rate of depreciation of the nominal exchange rate between two countries is…
The relevant difference is between national inflation rates. Under relative purchasing power parity, the currency of the country with higher inflation tends to depreciate by…
Choose your answer
Over the long run the rate of depreciation of the nominal exchange rate between two countries is approximately equal to the difference in national __________ rates.
Answer and explanation
Correct answer C
The relevant difference is between national inflation rates. Under relative purchasing power parity, the currency of the country with higher inflation tends to depreciate by approximately that inflation differential over the long run.
Practice for these exams
-
Jammu & Kashmir and Ladakh SET (JKSET/LASET)