If Purchasing-Power Parity Holds,when a Country's Central Bank Decreases the Money

question 1

Multiple Choice

If purchasing-power parity holds,when a country's central bank decreases the money supply,its

• A)price level rises and its currency appreciates relative to other currencies in the world.
• B)price level falls and its currency appreciates relative to other currencies in the world.
• C)price level rises and its currency depreciates relative to other currencies in the world.
• D)price level falls and its currency depreciates relative to other currencies in the world.

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Definitions:

Principal

The original sum of money borrowed in a loan, or the amount of the loan that has not yet been repaid, excluding interest.

Straight-Line Method

A depreciation technique that allocates an equal portion of an asset's cost to each period of its useful life.

Interest Expense

The cost incurred by an entity for borrowed funds, represented as a charge against earnings in the income statement.

Interest Payable

The amount of interest that has been incurred on borrowed funds that a company must pay, typically represented as a current liability on the balance sheet.