Which of the Below Statements Is FALSE

question 14

Multiple Choice

Which of the below statements is FALSE?

• A) Spot exchange rates adjust to compensate for the relative inflation rate reflecting the so-called purchasing power parity relationship.
• B) The purchasing power parity relationship posits that the exchange rate - the domestic price of the foreign currency - is proportional to the domestic inflation rate, and inversely proportional to foreign inflation.
• C) Because of the importance of the euro in the international financial system, currency quotations are all relative to the euro.
• D) Suppose that on day 1 the spot exchange rate between the U.S. dollar and country X is $0.80 and on the next day, day 2, it changes to $0.81. Thus, the currency unit of country X appreciated relative to the U.S. dollar from day 1 to day 2.

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Definitions:

Incentive

Something that motivates or encourages someone to do something.

Quick Action

Immediate or prompt response to a situation, often requiring decisiveness and efficiency.

Maslow's Hierarchy

A psychological theory proposed by Abraham Maslow that outlines a five-tier model of human needs, depicted as hierarchical levels within a pyramid.

Factual Evidence

Factual evidence is information that can be verified and objectively proven to support assertions or conclusions.