The Theory of "Purchasing Power Parity" (PPP)predicts That

question 150

Multiple Choice

The theory of "purchasing power parity" (PPP) predicts that

• A)the actual exchange rate will eventually exceed the PPP exchange rate.
• B)the actual exchange rate will eventually be lower than the PPP exchange rate.
• C)the actual exchange rate will eventually equal the PPP exchange rate.
• D)there is no relationship between the actual exchange rate and the PPP exchange rate.
• E)the prices of of non-traded goods will be equalized across all countries.

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Definitions:

Social Security Tax

A payroll tax collected to fund the Social Security program, charged to both employers and employees.

Sales Tax

A tax imposed by a government on sales of goods and services, collected by the retailer and passed on to the state or local government.

Proportional Rate Structure

A tax system where the tax rate is the same for all income levels, meaning everyone pays the same percentage of their income in taxes, regardless of how much they earn.

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are rules made by a government or regulatory body that have the force of law.