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.

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