The Theory of Purchasing Power Parity Assumes

question 104

Multiple Choice

The theory of purchasing power parity assumes:

• A) the real exchange and nominal exchange rates are fixed.
• B) the nominal exchange rate is fixed but the real exchange rate is flexible.
• C) the real exchange rate is fixed but the nominal exchange rate is flexible.
• D) the real exchange rate varies with the inflation differential.

---

Definitions:

World Peace

is the ideal of a future state where countries coexist harmoniously without conflict and all individuals live in freedom and safety.

Defense Policy

Guidelines and strategies adopted by a nation to protect its interests, sovereignty, and citizens from external threats.

Cold War

A period of geopolitical tension between the Soviet Union and the United States and their respective allies, the Eastern Bloc and the Western Bloc, after World War II.