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If non-tradable goods prices rise faster in country A than in country B, and non- tradable goods prices rise faster than prices in general, the

If non-tradable goods prices rise faster in country A than in country B, and non- tradable goods prices rise faster than prices in general, the currency of country A will appear to depreciate by more than is called for by PPP as measured by price indices. (Assume countries A and B are similar in other respects.)

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