If the Purchasing Power Parity Theory Were Literally True

question 20

Multiple Choice

If the purchasing power parity theory were literally true:

• A)we should see some nations devaluing their currencies relative to the U.S.dollar,while other nations revalue their currencies.
• B)the price of a traded good should be the same everywhere in the world.
• C)the price of a Big Mac should be the different everywhere in the world.
• D)the exchange rate should be the same between all the countries.
• E)prices should tend toward equality with exchange rates.

---

Definitions:

Wholesale Goods

Goods sold in large quantities at reduced prices, typically to retailers who then sell them to the public.

Retail Products

Goods that are sold to the public through stores, online, or other channels, typically for personal or household use.

Durable Goods

Products or goods that do not quickly wear out and provide utility over time, often lasting for years.

Smartphones

Mobile devices that combine features of a traditional mobile phone with those of other popular consumer gadgets, like personal digital assistants, media players, and GPS navigation units.