If Absolute PPP Held,then the Real Exchange Rate Must Be

question 22

Multiple Choice

If absolute PPP held,then the real exchange rate must be equal to

• A)a constant.
• B)one.
• C)zero.
• D)a positive number.

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Definitions:

Lump-Sum Taxes

Taxes that are a fixed amount, not dependent on the taxpayer's income or activities, thus they do not distort economic decisions.

Economic Efficiency

A condition where every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency.

Ability-To-Pay Principle

The ability-to-pay principle in taxation suggests that taxes should be levied based on an individual's or entity's capacity to pay, meaning those with higher income should pay more.

Cigarette Taxes

Taxes imposed on the sale of cigarettes to discourage consumption and raise government revenue, often used for public health initiatives.