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Because there are a variety of factors in addition to inflation that affect exchange rates, this will: 1. reduce the probability that PPP will hold.

Because there are a variety of factors in addition to inflation that affect exchange rates, this will:

1. reduce the probability that PPP will hold.

2. increase the probability that PPP will hold.

3. increase the probability the IFE will hold.

4. increase the probability that PPP will hold AND increase the probability the IFE will hold.

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