The purchasing power parity theory helps explain long-run trends in exchange rates,but not short-run fluctuations.

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Dayne Campfield · Accepted Answer

Final Answer : True, Explanation :  The purchasing power parity theory suggests that in the long run, exchange rates will adjust to equalize the prices of identical goods and services in different countries. However, short-term fluctuations in exchange rates can be influenced by various factors, such as changes in interest rates, political instability, and market sentiment. Therefore, the theory only applies to long-term trends in exchange rates, not short-term fluctuations.

The purchasing power parity theory helps explain long-run trends in exchange rates,but not short-run fluctuations.

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