Which of the Following Is True of the Theory of Purchasing

question 15

Multiple Choice

Which of the following is true of the theory of purchasing power parity (PPP) ?

• A) It suggests that in the long run,exchange rates should move toward levels that would equalize the prices of an identical basket of goods in any two countries.
• B) It encourages traders to buy low and sell high,eventually driving different prices for identical products to the same level around the world.
• C) It suggests that the price for identical products sold in different countries should be controlled purely by the supply and demand of those goods.
• D) It increases the disparity of prices for identical products from different countries.

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