Relative PPP Indicates That

question 13

Multiple Choice

Relative PPP indicates that

• A)the exchange rate between any two currencies is equal to the ratio of their price indexes.
• B)the same good sells for the same price internationally.
• C)the percentage change in the exchange rate is equal to the inflation differential between the domestic and foreign country.
• D)relative prices determine exchange rates.

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Definitions:

Credit To Inventory

An accounting entry that increases the inventory account, reflecting the addition of goods or the correction of an underreported inventory balance.

Credit Period

The amount of time the buyer is allowed in which to pay the seller.

Credit Memo

A document issued by a seller to a buyer, reducing the amount the buyer owes to the seller under previous invoices.

Percent Of Cash Discount

The percentage reduction in price offered for prompt payment of invoices to encourage early settlement of accounts payable.