Flscher effect (PE) holds perfecely a there must be a high degree of inflation in at least one country h one of the currencies is overpriced c there are no opportunities for profit by borrowing in one country, country for a certain period d band e investing in a 6. The theory of relative purchasing power parity states that, between two nations, th a. One dollar should buy the same amount of goods b. exchange rate is unrelated to inflation differential c inflation rate is smaller in stronger currencies d. the interest rate is greater than the inflation rate during depreciations