If the UK Price Level Is Increasing by 3 Per

question 23

Multiple Choice

If the UK price level is increasing by 3 per cent annually and the Swiss price level is increasing by 5 per cent annually, by what percentage would the pound sterling price of Swiss francs need to change according to purchasing power parity?

• A) depreciate by 5 per cent per year
• B) appreciate by 3 per cent per year
• C) appreciate by 5 per cent per year
• D) depreciate by 2 per cent per year

---

Definitions:

Labor

The physical and mental effort used in the production of goods and services.

Good

A material item or service that can be bought, sold, or traded, providing utility or satisfaction to the buyer.

Circumstances

A fact or condition connected with or relevant to an event or action, often influencing it or determining the outcomes.

Economic Theory

A set of principles and models that attempts to explain how economies operate and how economic agents interact.