Purchasing Power Parity Does Not Hold in the Short to Medium

question 68

Multiple Choice

Purchasing power parity does not hold in the short to medium run because

• A)exports don't equal imports.
• B)exchange rates fluctuate too much.
• C)some goods aren't internationally traded.
• D)most business cycles are caused by shocks to aggregate demand.

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Definitions:

Required Rate

The minimum annual percentage return that an investment must yield to an investor to consider it a viable option.

Dividend Growth

The rate at which a company's dividend payouts increase over time, often seen as an indicator of the company's financial health and stability.

Constant Dividend

A cash payout policy where a company pays a fixed amount of dividend to its shareholders over time.

Rate of Return

The increase or decrease in the value of an investment during a set timeframe, shown as a percent of the investment's starting value.