The Purchasing Power Parity Theory Claims That a Change in Relative

question 73

Multiple Choice

The purchasing power parity theory claims that a change in relative ________ between two countries must cause a change in ________ in order to keep the prices of goods in two countries fairly similar.

• A)exchange rates; inflation
• B)inflation; exchange rates
• C)interest rates; inflation
• D)interest rates; exchange rates

---

Definitions:

Direct Method

In cash flow reporting, a format that presents major classes of gross cash receipts and payments, providing transparency into a company's operating cash flows.

Operating Activities

Activities that constitute the primary or main activities of a business, such as selling goods or providing services.

Cash Collections

Cash collections involve the process of gathering all payments or receipts in cash form, typically from customers or clients.

Indirect Method

A method for preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.