If Purchasing-Power Parity Holds but Then U

question 14

Multiple Choice

If purchasing-power parity holds but then U.S.prices rise,which of the following move the exchange rate back towards purchasing-power parity?

• A)foreign prices rise or the U.S.nominal exchange rate rises
• B)foreign prices rise or the U.S.nominal exchange rate falls
• C)foreign prices fall or the U.S.nominal exchange rate rises
• D)foreign prices fall or the U.S.nominal exchange rate falls

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Definitions:

Interest Receivable

The amount of interest that has been earned but not yet received in cash.

Total Proceeds

The total amount received from a transaction, including the sale of assets, securities, or other property, before any deductions or expenses.

Sale

The exchange of a good or service for money; a transaction between two parties where the buyer acquires ownership of the item.

Interest Revenue

Income earned from lending money or other types of investments that yield interest.