According to Purchasing-Power Parity, If Prices in the United States

question 218

Multiple Choice

According to purchasing-power parity, if prices in the United States increase by a larger percentage than prices in Poland, then

• A)the real exchange defined as Polish goods per unit of U.S. goods rises.
• B)the real exchange defined as Polish goods per unit of U.S. goods falls.
• C)the nominal exchange rate defined as Polish currency per dollar rises.
• D)the nominal exchange rate defined as Polish currency per dollar falls.

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Definitions:

Replacement Rate

In the context of benefits or salaries, it refers to the percentage of a worker's pre-retirement income that is paid out by a pension program upon retirement.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Future Value

The amount to which some current amount of money will grow if interest earned on the amount is left to compound over time.

Market Rate

The prevailing interest rate available in the marketplace, often influenced by factors like central bank rates, inflation, and the demand for and supply of credit.