Question: One proposal to stabilize the international monetary system involves setting exchange rates at their purchasing power parity rates. Once exchange rates were correctly aligned (according

One proposal to stabilize the international monetary system involves setting exchange rates at their purchasing power parity rates. Once exchange rates were correctly aligned (according to PPP) each nation would adjust its monetary policy so as to maintain them. What problems might arise from using the PPP rate as a guide to the equilibrium exchange rate?

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