If the Purchasing Power of the Dollar Is Greater Than

question 88

Multiple Choice

If the purchasing power of the dollar is greater than the purchasing power of the euro,purchasing power parity predicts that the exchange rate will

• A)increase if the exchange rate is greater than 1 euro per dollar.
• B)decrease if the exchange rate is less than 1 euro per dollar.
• C)be equal to the relative purchasing power across the currencies in the long run.
• D)not fluctuate and stay constant in the long run.

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Definitions:

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