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Suppose that prices in Brazil are rising faster than US prices, and the US is a very important trading partner of Brazil. (Brazils currency is
- Suppose that prices in Brazil are rising faster than US prices, and the US is a very important trading partner of Brazil. (Brazils currency is called the real.) Suppose the dollar/real rate is floating.
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What does relative purchasing power parity (RPPP) say should happen to the value of the real relative to the US dollar? Explain.
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