Question $1$

According to purchasing power parity theory, if Brazilian inflation wasts percent and inflation in Argentina was $12$ percent, the Brazilian Real $($Brazil$\text{'}$s currency, $1$ Real $=100$ Centavos$)$ would be expected to

rise by $4\mathrm{.}5$ percent

fall by the difference in inflation rates

rise by the difference in inflation rates

stay the same because inflation is not a contributing factor to exchange rate changes