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  • In its relative form, PPP says that the rate of change of the exchange rate is approximately equal to the difference between inflation rates. #191
  • Speculation and efficient markets also produce the relative form of the PPP condition in terms of expected values. #192
  • Empirical support for the PPP condition is high, although there is some evidence it may hold in the long run. #193
  • The reasons the law of one price and PPP do not hold include transportation costs, tariffs, quotas, and the fact that there are goods and services that are non-tradable. #194
  • A country's balance of payments accounts include all of the following EXCEPT #195
  • The fact that empirical evidence does support PPP may be due to statistical difficulties in evaluating the principle. #196
  • There are several reasons why … should be performed by the firm rather than by its shareholders. #197
  • An importer or exporter faces exposure and risk because of … between agreeing on a foreign-currency price and settling the transaction. #198
  • The expected cost of hedging is the difference between the forward exchange rate for buying/selling and the expected future … for buying/selling. #199
  • The expected cost of hedging can be estimated as … of the difference between the forward spread and the spot spread. #200
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