According to the Purchasing Power Parity Theory,in the Long Run

question 110

Multiple Choice

According to the purchasing power parity theory,in the long run:

• A)the exchange rate between any two currencies should be equal all over the world.
• B)the value of the U.S.dollar should equal the value of the pound which should equal the value of the yen.
• C)inflation rates should equalize around the world.
• D)interest rates should equalize around the world.
• E)the exchange rate between the currencies of two countries should reflect the differences in price levels in the two countries.

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Definitions:

Efficient Markets Hypothesis

The theory that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns than the overall market through stock picking or market timing.

Efficient Markets Hypothesis

The theory that financial markets fully reflect all available information at any given time, making it impossible to consistently achieve higher returns than the overall market.

Share Price

The current price at which a single share of a company's stock can be bought or sold in the financial markets.

Utility Function

A utility function is an economic model representing a consumer's preference ranking for various bundles of goods or services, quantifying satisfaction levels.