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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