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When the British price level rises by 5 percent in comparison to the European Union price...

When the British price level rises by 5 percent in comparison to the European Union price level, what does the purchasing power parity principle expect happen to the value of British pound in terms of Euro?

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As the price level in Britain has increased the demand for British goods will decrease and people will demand more Euro goods in the market, this will increase the demand for Euro and increase the supply of pound, this will depreciate the pound in the market and appreciate the Euro to maintain the PPP.

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