What is purchasing power parity and what happens when this condition doesn't hold?

Purchasing power parity is __________.

a. an easy method of determining whether a currency is overvalued or undervalued

b. equal real GDP per person in all countries

c. equal value of money

d. equal rates of return

Suppose that purchasing power parity does not hold. If all (or most) prices have increased in the United States and not increased in Japan, then people will generally expect that the foreign exchange value of the dollar will _____. The demand for dollars _______.

a. fall; decreases and the supply of dollars increases

b. fall; increases and the supply of dollars decreases

c. rise; decreases and the supply of dollars increases

d. rise; increases and the supply of dollars decreases