Which of the Following Is a Statement of the Purchasing

question 30

Multiple Choice

Which of the following is a statement of the purchasing power parity theory of exchange rate determination? The exchange rate will adjust in the

• A) long run until the interest rate is roughly the same in both countries.
• B) long run until real GDP is roughly the same in both countries.
• C) long run until the average price of goods is roughly the same in both countries.
• D) short run until the average price of goods is roughly the same in both countries.

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Definitions:

Objective Concept

A notion or idea based on factual and measurable evidence rather than personal feelings or opinions.

Observable Phenomenon

Events or occurrences that can be perceived directly through the senses or with the help of scientific instruments.

Not Scarce

Describes resources that are available in abundance and not limited in supply, in contrast to scarce resources which are limited and can be exhausted.