Question: Purchasing power parity (PPP) theory specifies a precise relationship between the relative inflation rates of two countries and their exchange rate. This theory suggests that

Purchasing power parity (PPP) theory specifies a precise relationship between the relative inflation rates of two countries and their exchange rate. This theory suggests that the equilibrium exchange rate will adjust by approximately the same magnitude as the difference between the two countries inflation rates. Is it possible that the currency of countries with high inflation can strengthen over time? Explain

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