Which of the following describes the purchasing power parity theory of exchange rate determination?
a. The exchange rate will adjust in the long run until the interest rate is roughly the same in both countries.
b. The exchange rate will adjust in the long run until real GDP per capita is roughly the same in both countries.
c. The exchange rate will adjust in the long run until the average price of goods is roughly the same in both countries.
d. The exchange rate will adjust in the short run until the average price of goods is roughly the same in both countries.
e. Prices adjust in the short run until the exchange rate is roughly the same in both countries.
C
You might also like to view...
If one country has an absolute advantage in every commodity, there is no reason for it to trade
a. True b. False Indicate whether the statement is true or false
For a good with many substitutes, _____
a. buyers pay less of the tax than the sellers b. demand is relatively inelastic c. supply is unit elastic d. sellers pay less of the tax than the buyers