Because There Are a Variety of Factors in Addition to Inflation

question 11

Multiple Choice

Because there are a variety of factors in addition to inflation that affect exchange rates, this will:

• A) reduce the probability that PPP shall hold.
• B) increase the probability that PPP shall hold.
• C) increase the probability the IFE will hold.
• D) B and C

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Definitions:

Linear Relationship

A type of association where changes in a variable predictably correspond to changes in another variable with a constant rate.

Horizontal Axis

The x-axis in a graph or chart, typically representing the independent variable or the scale of time.

Vertical Axis

The y-axis in a chart or graph, which often represents the range of the dependent variable.

Slope

The rate at which a line inclines or declines, showing the relationship between two variables in a graph, calculated as the rise over the run.