Which of the Following Is NOT an Implication of the Theory

question 42

Multiple Choice

Which of the following is NOT an implication of the theory of purchasing power parity?

• A) Exchange rates move to equalize the purchasing power of different currencies.
• B) Exchange rates should be at a level that makes it possible to buy the same amount of goods and services with the equivalent amount of any country's currency in the long run.
• C) A country with a higher inflation rate should experience an appreciation of its currency.
• D) The real exchange rate should equal one.

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Definitions:

Average Collection Period

The average number of days it takes for a business to receive payments from its customers for invoices.

Accrued Salaries

Wages that have been earned by employees but have not yet been paid out.

Fixed Assets

Long-term tangible assets that are used in the operations of a business and are not intended to be sold within a year.

Average Collection Period

The average number of days it takes for a company to collect payments from its credit sales.