The Theory of PPP Suggests That If One Country's Price

question 18

Multiple Choice

The theory of PPP suggests that if one country's price level falls relative to another's,its currency should

• A)depreciate in the long run.
• B)appreciate in the long run.
• C)appreciate in the short run.
• D)depreciate in the short run.

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Definitions:

Consumer's Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.

Used Cars

Pre-owned vehicles that have had one or more retail owners, sold through various outlets, including franchise and independent car dealers.

First-Degree Price Discrimination

A pricing strategy where a seller charges the maximum price that each individual consumer is willing to pay, leading to maximum possible profit for the seller.

Inverse Demand Function

A mathematical representation that describes the price of a good or service as a function of the quantity demanded, highlighting how prices can adjust based on consumer demand.