Which Is Correct with Respect to the Absolute PPP Theory

question 17

Multiple Choice

Which is correct with respect to the absolute PPP theory?

• A)It postulates that the exchange rate between two currencies is equal to the ratio of the price levels in the two nations
• B)it does not take into consideration transportation costs or other obstructions to the flow of international trade
• C)can be very misleading
• D)all of the above

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