Under the theory of purchasing power parity, an increase in the U.S. price level of 10% relative to the Japanese price level will result in
A) a 10% appreciation of the yen.
B) a 10% appreciation of the dollar.
C) an appreciation of the yen by an amount that depends upon what happens to the real exchange rate.
D) an appreciation of the dollar by an amount that depends upon what happens to the real exchange rate.
A
Economics
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