according to the theory of purchasing power parity, if the price level in the united states rises by 5% while the price level in mexico rises by 6%, then the dollar will a. appreciate 5% relative to the peso. b. depreciate 5% relative to the peso. c. appreciate 1% relative to the peso. d. depreciate 1% relative to the peso. part 2 reasons why the theory of purchasing power parity might not fully explain exchange rate movements include a. changes in the domestic price level that exceed changes in the foreign price level. b. changes in foreign price levels that exceed changes in the domestic price level. c. changes in the prices of goods and services not traded internationally. d. differing monetary policies in different countries.
