The Empirical Evidence on Purchasing Power Parity Over the Long

question 53

Multiple Choice

The empirical evidence on purchasing power parity over the long run seems to point out that:

• A) the higher a country's inflation rate, the greater is the appreciation in the country's currency.
• B) the theory of purchasing power parity cannot explain long-run changes in exchange rates.
• C) the higher a country's inflation rate the greater is the depreciation in the country's currency.
• D) there isn't any clear link between inflation rates and exchange rates.

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Definitions:

Avoidance Learning

A process in behavioral psychology where a subject learns to prevent or avoid an unpleasant stimulus by making particular responses.

Learned Helplessness

A condition where individuals learn to believe that they have no control over their situation, often leading to a lack of motivation and depression.

Extinction Learning

A process in cognitive psychology and behavioral therapy where a conditioned response gradually diminishes and eventually disappears as the conditioned stimulus is no longer paired with an unconditioned stimulus.

Generalized Learning

The process through which skills or knowledge learned in one context or situation are applied to different but related contexts or situations.