Which Is Correct with Respect to the Absolute Purchasing Power

question 19

Multiple Choice

Which is correct with respect to the absolute purchasing power parity theory?

• A) It postulates that the exchange rate between two currencies is equal to the ratio of the price levels in the two nations
• B) it does not take into consideration transportation costs or other obstructions to the flow of international trade
• C) can be very misleading
• D) all of the above

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