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

---

Definitions:

F.O.B. Contract

A shipping agreement where "Free On Board" determines that the seller delivers goods on board a vessel designated by the buyer, transferring the risk from the seller to the buyer once the goods are onboard.

C.O.D. Contract

Contract of "Cash On Delivery" where payment for goods is made at the time of delivery rather than in advance.

Privity of Contract

A legal concept that restricts the parties who can sue or be sued under a contract to those who are a part of the contract agreement.

Consumer Transactions

Business dealings or trade between sellers and individuals who are purchasing for personal, family, or household use.