Chapter 16 Price Levels and the Exchange Rate in the Long Run
Learning Objectives 1.Explain the purchasing power parity theory of exchange rates and the theory’s relationship to international goods-market integration. 2.Describe how monetary factors such as ongoing price level inflation affect exchange rates in the long run. 3.Discuss the concept of the real exchange rate. 4.Understand factors that affect real exchange rates and relative currency prices in the long run. 5.Explain the relationship between international real interest rate differences and expected changes in real exchange rates.