Which of the Following Does Purchasing-Power Parity Imply

question 47

Multiple Choice

Which of the following does purchasing-power parity imply?

• A)the foreign price level times the nominal exchange rate (given as amount of foreign currency per dollar)equals the U.S.price level.
• B)The price of domestic goods relative to foreign goods cannot change.
• C)The nominal exchange rate is the ratio of foreign prices to U.S.prices.
• D)All of the above are correct.

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Definitions:

Decision Initiation

The process of beginning the process of making a choice or determining a course of action.

Decision Control

Those aspects of the decision process in which managers either ratify or monitor decisions.

Free Rider

An individual who benefits from resources, goods, or services without paying for them, leading to an economic problem in public goods and services provision.

Agency Problem

A conflict of interest inherent in any relationship where one party is expected to act in another's best interests.