Suppose the exchange rates between the United States and Euro Area are in long-run equilibrium as defined by the idea of purchasing power parity. If the law of one price holds perfectly, then differences between U.S. and Euro Area rates of inflation would

• A. have no effect on nominal exchange rates.
• B. be completely offset by changes in the real exchange rate.
• C. be completely offset by changes in the nominal exchange rate.
• D. violate the conditions for the law of one price.