If a Commodity Costs the Same Regardless of the Currency

question 61

Multiple Choice

If a commodity costs the same regardless of the currency used to purchase it or the country where it is sold, then _________________.

• A) Forward exchange rates are equal.
• B) Interest rate parity holds.
• C) Relative purchasing power parity holds.
• D) Uncovered interest rate parity holds.
• E) Absolute purchasing power parity holds.

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Definitions:

Purchasing Power

The financial ability to buy goods and services; it reflects the value of money in terms of the quantity of goods or services that one unit of money can buy.

Government Bonds

Debt securities issued by a government to support government spending and obligations.

Savings Account

A bank account where people can deposit money to earn interest over time, with fewer withdrawal facilities.

Real Estate

Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water.