1 why a change in the real exchange rate changes a countrys


The theory of purchasing-power parity primarily explains

1. why a change in the real exchange rate changes a country's net exports.
2. why trade deficits tend to move to zero over time.
3. how foreign prices affect domestic prices.
4. the determination of the real exchange rate.

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International Economics: 1 why a change in the real exchange rate changes a countrys
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