1. Absolute PPP assumes that changes in exchange rates are due to differences in expected inflation between countries.
True
False
2. Relative PPP can be tested by regressing currency fluctuations on inflation differentials.
True
False
3. One of the problems with IFE is that it assumes absolute PPP holds.
True
False
4. IRP can be adjusted to account for market imperfections such as taxes and transactions costs.
True
False