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    Question

    Exchange rate determination by comparing purchasing

    power of currencies is:
    A Interest Rate Parity Correct Answer Incorrect Answer
    B Purchasing Power Parity Correct Answer Incorrect Answer
    C International Fisher Effect Correct Answer Incorrect Answer
    D Balance of Payments Theory Correct Answer Incorrect Answer

    Solution

    PPP theory states that exchange rates between currencies are in equilibrium when their purchasing power is the same in both countries.

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