Purchasing power parity's assumption that the real exchange is constant
A) is correct in nearly all instances.
B) would be correct were it not for the existence of trade barriers.
C) is not reasonable.
D) is correct for trade between the United States and Japan, but incorrect in most other bilateral trading relations.
C
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The marginal propensity to consume is calculated by
A) dividing the change in income by the change in consumption. B) dividing income by consumption. C) dividing consumption by income. D) dividing the change in consumption by the change in income.
According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?
a. the real exchange rate, but not the nominal exchange rate b. the nominal exchange rate, but not the real exchange rate c. the real exchange rate and the nominal exchange rate d. neither the real exchange rate nor the nominal exchange rate