the increase in the money supply as being analogous to giving people more money. If the output of goods and services is not growing at a similar rate, inflation will eventually occur. According to PPP Theory, what will happen to the U.S. dollar? Why?© BrainMass Inc. brainmass.com October 25, 2018, 10:01 am ad1c9bdddf
When inflation occurs the value of the home currency will be at a disadvantage and hence this currency will have a low purchasing power. So according to the purchasing power parity (PPP), currency exchange rates between two countries should be equal to the aggregate levels of prices that are exhibited by the two countries . The PPP theory ...
The effects of inflation on a country's purchasing power and currency value.
Purchasing Power Parity: difference in inflation rate effect on exchange US to Canada
Suppose that the inflation rate in the United States is 4 percent and in Canada it is 5 percent. What would you expect is happening to the exchange rate between the United States and Canadian dollars?View Full Posting Details