Explain the purchasing-power-parity theory of exchange rates


Problem

"A rise in the dollar price of yen necessarily means a fall in the yen price of dollars." Do you agree? Illustrate and elaborate: "The critical thing about exchange rates is that they provide a direct link between the prices of goods and services produced in all trading nations of the world." Explain the purchasing-power-parity theory of exchange rates.

The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.

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Microeconomics: Explain the purchasing-power-parity theory of exchange rates
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