Suppose the Purchasing Power Parity Theory Is Literally True

question 20

Multiple Choice

Suppose the purchasing power parity theory is literally true.Which of the following would occur?  

• A) Some nations would devalue their currencies relative to the U.S. dollar, while other nations would revalue their currencies. 
• B) The price of a traded good would be the same everywhere in the world. 
• C) The price of a Big Mac would be the same everywhere in the world. 
• D) The exchange rate would be the same everywhere in the world.

---

Definitions:

Indirect Expenses

Costs not directly linked to the production of goods or services, such as administrative and marketing expenses.

Subjective

Based on personal opinions, interpretations, points of view, or emotions rather than objective facts.

Cost of Goods Sold

The expenses directly related to the manufacturing of products sold by a business, including the costs associated with materials and labor.

Departmental Accounting

An accounting method that tracks the income, expenses, and profitability of individual departments within a company.