For Purchasing-Power Parity to Exist

question 73

Multiple Choice

For purchasing-power parity to exist,

• A) flows of currency in the trade account must be offset by flows of currency in the capital account.
• B) the nominal interest rate must be equal to the real interest rate in all countries.
• C) converting a sum of funds from one currency to another does not alter its purchasing power.
• D) a country's trade account must always be in balance.

---

Definitions:

Vacation

A period of time spent away from home or work for rest, relaxation, or travel.

Dream Vacation

A highly idealized travel experience, often imagined or planned, that represents a person's ultimate holiday destination and activities.

Approach-Avoidance Conflict

A psychological conflict that occurs when a goal or event has both attractive and unattractive qualities, leading to indecision or ambivalence.

Life Stress

A term referring to the physical and psychological strain or tension resulting from one's response to challenges, demands, and changes in life.