If the Purchasing Power of a Dollar Is Less Than

question 195

Multiple Choice

If the purchasing power of a dollar is less than the purchasing power of the euro,purchasing power parity would predict that

• A)in the short run,exchange rates will move to equalize the purchasing power of the dollar and the euro.
• B)in the long run,exchange rates will move to equalize the purchasing power of the dollar and the euro.
• C)in the long run,interest rates will move to equalize the purchasing power of the dollar and the euro.
• D)in the short run,interest rates will move to equalize the purchasing power of the dollar and the euro.

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Definitions:

Invoice Price

The invoice price is the original price that a manufacturer suggests for the sale of a product or service before any discounts or allowances are applied.

Taxable Income

The portion of an individual's or corporation's income that is subject to taxation by government authorities.

LIFO Method

Last-In, First-Out method; an inventory valuation method where the most recent items added to the inventory are assumed to be the first sold.

Period Of Inflation

A time frame in which the overall level of prices for goods and services is rising, leading to a decrease in purchasing power.