For Purchasing-Power Parity to Exist

question 179

Multiple Choice

For purchasing-power parity to exist:

• A) Flows of currency in the trade account must be offset by flows of currency in the capital account
• B) The nominal interest rate must be equal to the real interest rate in all countries
• C) Converting a sum of funds from one currency to another does not alter its purchasing power
• D) A country's trade account must always be in balance

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Definitions:

Consideration

The value (such as money, services, or goods) that is promised to be transferred in a contract, creating a binding obligation.

Merchant Customer

A consumer who has a commercial relationship with a business or merchant, typically involving the purchase of goods or services.

Dispatch

The act of sending something or someone to a specific destination or for a certain purpose.

Acceptance

The act of agreeing to receive something offered or the acknowledgment of a new contractual proposal.