What does Purchasing Power Parity (PPP) theory predict about long-term exchange rates?
-
A
Exchange rates adjust so that identical goods cost the same in different countries when priced in a common currency
-
B
Higher-yielding currencies always appreciate over time relative to lower-yielding ones
-
C
Central banks should maintain equal purchasing power for all citizens regardless of exchange rates
-
D
Trade balances are the sole determinant of long-term exchange rate movements