Curiosity 15.1: Where Is the Foreign Exchange Market?

17
Purchasing Power Parity
Earlier discussions of the international sector were conducted in the context of a non-inflationary environment, both in the United States and in the rest of the world. Although relaxing this simplifying assumption does not undo the lessons we learned earlier, it does allow us to modify them to explain some anomalies. The purpose of this chapter is to explain a general rule of thumb, called purchasing power parity, that can provide a guide to to the behavior of an economy's exchange rate over the long run in an inflationary environment.

 



Macroeconomic Essentials. Understanding Economics in the News 2000
Macroeconomic Essentials - 2nd Edition: Understanding Economics in the News
ISBN: 0262611503
EAN: 2147483647
Year: 2004
Pages: 152

flylib.com © 2008-2017.
If you may any questions please contact us: flylib@qtcs.net