What Is the Idea Behind Purchasing Power Parity

question 142

Multiple Choice

What is the idea behind purchasing power parity?

• A) A unit of currency buys the same quantity of goods and services after adjusting for transportation costs and trade barriers.
• B) A unit of currency should be able to buy the same quantity of goods and services in any country.
• C) A unit of currency will seek an exchange rate where it is equal in value to a foreign unit of currency.
• D) A unit of currency has purchasing power relative to its exchange rate.
• E) Supply and demand will always seek parity pricing for identical goods and services.

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