Which of the Following Describes the Purchasing Power Parity Theory

question 154

Multiple Choice

Which of the following describes the purchasing power parity theory of exchange rate determination?

• A) The exchange rate will adjust in the long run until the interest rate is roughly the same in both countries.
• B) The exchange rate will adjust in the long run until real GDP per capita is roughly the same in both countries.
• C) The exchange rate will adjust in the long run until the average price of goods is roughly the same in both countries.
• D) The exchange rate will adjust in the short run until the average price of goods is roughly the same in both countries.
• E) Prices adjust in the short run until the exchange rate is roughly the same in both countries.

---

Definitions:

Sharing Power

Sharing power involves the equitable distribution of influence and decision-making authority among stakeholders or negotiators to ensure fair negotiations and outcomes.

Hard Tactics

Strategies or actions used in negotiations or influence that are more forceful, direct, or aggressive.

Breakthrough Approach

Innovative or novel strategies that enable overcoming obstacles and achieving significant progress in a field or situation.

Difficult Situations

Circumstances that pose challenges or obstacles that are hard to overcome or deal with.