On Behalf of Your Firm, You Make Frequent Trips to Hong

question 40

Multiple Choice

On behalf of your firm, you make frequent trips to Hong Kong. You notice that you always have to pay more dollars to get enough local currency to get your hair styled than you have to pay to get your hair styled in Canada. Is this consistent with purchasing power parity?

• A)No, but it might be explained by limited opportunities for arbitrage across international borders.
• B)Yes, if prices in Hong Kong are rising more rapidly than prices in Canada.
• C)Yes, if prices in Hong Kong are rising less rapidly than prices in Canada.
• D)No, but it can be explained by arbitrage across international borders.

---

Definitions:

Merger or Acquisition

A business strategy where two companies combine (merger) or one company purchases another (acquisition) to enhance competitive strengths or enter new markets.

Joint Venture

A business endeavor undertaken by two or more entities, pooling resources to achieve a specific goal.

Co-Owned Entity

A business or property that is legally owned by two or more parties.

Joint Goal

A shared objective or aim that is pursued by two or more parties in collaboration or partnership.