Answer:
The purchasing power parity theory best predicts exchange rate changes for countries with relatively similar inflation rates and production costs.
This theory states that the exchange rate between two countries should adjust to reflect the relative difference in the price level of the two countries.
This means that if the inflation rate in one country is higher than in another, then the exchange rate between them should adjust to account for this difference.
In other words, countries with similar inflation rates and production costs should have exchange rates that remain relatively constant over time.