'Purchasing Power Parity' Is the Theory That in the Long

question 109

Multiple Choice

'Purchasing power parity' is the theory that in the long run, exchange rates move to equalise:

• A)nominal interest rates across countries.
• B)real GDP across countries.
• C)corporate profits across countries.
• D)the relative purchasing power of currencies across countries.

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Definitions:

Automatic Stabilizer

Economic policies and programs, like unemployment insurance and progressive taxation, designed to automatically adjust to changes in economic conditions to stabilize the economy.

Tax Hikes

Tax hikes involve an increase in the tax rates or the imposition of new taxes by the government, affecting individuals, businesses, and economic activities.

Progressive Personal Income Tax

A tax system where the tax rate increases as the taxable income of the taxpayer increases, imposing higher rates on those with higher incomes.

Fiscal Policy

Government policies related to taxation and public spending designed to influence economic conditions, such as inflation, employment, and economic growth.