Exchange rate obeys relative purchasing power parity

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Reference no: EM131083234

What will happen to the dollar value of peso-denominated earnings at a U.S. company’s Mexico subsidiary if:

(a) Mexico has inflation of 10%,

(b) the U.S. has inflation of 0%,

(c) the peso/dollar exchange rate obeys relative purchasing power parity?

Reference no: EM131083234

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