Which of the Following Statements About Purchasing Power Parity Is

question 41

Multiple Choice

Which of the following statements about purchasing power parity is correct? PPP

• A)is an index of the average value of exchange rates.
• B)is a theory that says price levels in two countries should be equal when measured in a common currency.
• C)allows for both countries' currencies to appreciate at their own rates of inflation.
• D)will tend to cause those currencies with lower inflation rates to depreciate.
• E)holds exactly in the short run but not in the long run.

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