The Theory of Purchasing Power Parity Cannot Fully Explain Exchange

question 50

Multiple Choice

The theory of purchasing power parity cannot fully explain exchange rate movements in the short run because

• A)all goods are identical even if produced in different countries.
• B)monetary policy differs across countries.
• C)some goods are not traded between countries.
• D)fiscal policy differs across countries.

---

Definitions:

Top-Down Influence

A form of control or governance where decisions and policies are initiated by higher authorities or levels of an organization and passed down to the lower levels.

Web Herding

The phenomenon where individuals' decisions or behaviors are influenced en masse through the Internet, often through social media or online reviews.

Functionalist

A viewpoint in both sociology and anthropology that sees society as a system comprised of interconnected components, which function to fulfill the social and biological requirements of its members.

Mass Media

Various forms of communication mediums, such as television, radio, newspapers, and the Internet, that reach a large audience.