What Is the Purchasing Power Parity Theory a Good Predictor

question 53

Multiple Choice

What is the purchasing power parity theory a good predictor of?  

• A) the long-run tendencies between changes in the price level and the exchange rate of two countries 
• B) the interest rate differentials between two countries when there are strong barriers preventing trade between the two countries 
• C) how intervention in exchange markets by central banks influences prices in various countries 
• D) the day-to-day relationship between changes in the price level and the exchange rate of two countries

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Definitions:

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