If the Purchasing Power of the Dollar Is Less Than

question 127

Multiple Choice

If the purchasing power of the dollar is less than the purchasing power of the British pound,purchasing power parity predicts that the exchange rate will

• A)increase if the exchange rate is greater than 1 pound per dollar.
• B)decrease if the exchange rate is less than 1 pound per dollar.
• C)be equal to the relative purchasing power across the currencies in the long run.
• D)All of the above are correct.

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