Question
What does Purchasing Power Parity imply about exchange rates over time?
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Answer
They adjust so identical goods cost the same across countries.
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Question
Under relative PPP, what inflation differential predicts approximate currency depreciation?
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Answer
Domestic inflation minus foreign inflation.
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Question
If the base currency appreciates in a P/B quote, what happens to the quoted rate?
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Answer
It increases.
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Question
How does a direct quote differ from an indirect quote?
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Answer
Direct: domestic per foreign; indirect: foreign per domestic.
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