Absolute PPP Holds for a Product Bundle If

question 4

Multiple Choice

Absolute PPP holds for a product bundle if:

• A)the law of diminishing returns holds for all the goods in the bundle.
• B)the goods are traded with minimum transportation costs.
• C)there exists free trade in all the commodities.
• D)the law of one price holds for each of the goods in the bundle.

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Definitions:

Exports

Goods or services produced in one country and sold to buyers in another, contributing to a nation's gross domestic product.

United States

A country in North America comprising 50 states and a federal district, known for its significant global economic and political influence.

Bretton Woods System

A monetary order negotiated in 1944 which established a system of fixed exchange rates, leading to the creation of the International Monetary Fund (IMF) and the World Bank.

Chronic Surpluses

Persistent excesses of income or receipts over expenditures in a budget or balance of payments over a period.