According to the Theory of Purchasing Power Parity, If Inflation

question 20

Multiple Choice

According to the theory of purchasing power parity, if inflation is 5 percent in the U.S. and 2 percent in Canada, then

• A)the U.S.dollar will appreciate against the Canadian dollar over time.
• B)the U.S.dollar will depreciate against the Canadian dollar over time.
• C)both the U.S.dollar and the Canadian dollar will appreciate against other currencies.
• D)both the U.S.dollar and the Canadian dollar will depreciate against other currencies.
• E)nothing will occur.

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Definitions:

Decay

The process of declining in quality, power, or vitality, often used in reference to physical or biological deterioration over time.

Interference Theory

A theory that explains how new learning can cause the forgetting of previously learned information due to overlap or interference.

Retroactive Interference

A phenomenon in memory where newly acquired information interferes with the retrieval of older information.

Decay Theory

The oldest theory of forgetting, which holds that memories, if not used, fade with time and ultimately disappear altogether.