The Purchasing Power Parity Theory

question 46

Multiple Choice

The purchasing power parity theory:

• A)is more a predictor of a long-run tendency than of the day-to-day relationship between changes in the price level and the exchange rate.
• B)predicts that exchange rates between two currencies will adjust in the short run so that the price level is equal to the exchange rate between two countries.
• C)is more a predictor of a short-run phenomenon than of a long-run relationship between the price level and the exchange rate between two countries.
• D)is helpful in explaining long-run trends,even though trade barriers and central bank intervention may hinder the usefulness of the theory.
• E)tells us that a country's currency generally will appreciate if its inflation rate is higher than that of the rest of the world.

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Definitions:

Maintenance Stage

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The equilibrium between professional responsibilities and personal life, aiming for a healthy management of work and leisure activities.

Advancement Stage

A phase in personal or professional development where skills and responsibilities are increased.

Career Stage Model

A theoretical framework that describes the various phases of an individual's career, typically including stages such as exploration, establishment, maintenance, and decline.