The Purchasing Power Parity Theory States That

question 49

Multiple Choice

The purchasing power parity theory states that

• A) exchange rates between any two currencies will adjust to reflect changes in the relative price level of the two countries.
• B) exchange rates between any two currencies will adjust to reflect change in the relative income growth rates of the two countries.
• C) the larger the economic growth rate in a country,the less likely its currency will depreciate in value.
• D) exchange rates cannot be compared over time.
• E) currencies appreciate as often as they depreciate.

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