The Purchasing Power Parity Theory Is a Good Predictor of

question 18

Multiple Choice

The purchasing power parity theory is a good predictor of

• A)all of the following
• B)the long-run tendencies between changes in the price level and the exchange rate of two countries
• C)interest rate differentials between two countries when there are strong barriers preventing trade between the two countries
• D)how intervention in exchange markets by central banks influences prices in various countries
• E)the day-to-day relationship between changes in the price level and the exchange rate of two countries

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