Which of the Following Statements Is the MOST Accurate

question 31

Multiple Choice

Which of the following statements is the MOST accurate?

• A) Relative PPP may be valid even when absolute PPP is not, provided the factors causing deviations from absolute PPP are more or less stable over different commodities space.
• B) Absolute PPP may be valid even when relative PPP is not, provided the factors causing deviations from relative PPP are more or less stable over time.
• C) Relative PPP may be valid even when absolute PPP is not, provided the factors causing deviations from absolute PPP are more or less stable over time.
• D) Relative PPP is not valid when absolute PPP is not.
• E) Relative PPP is only valid when absolute PPP is valid, providing the factors causing deviations from relative PPP are more or less stable over time.

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Definitions:

Determinant

A factor or element that causes change in an outcome or condition, often used in reference to variables that affect economic indicators.

Cross Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good.

Perfectly Inelastic

A situation in demand or supply in which the quantity demanded or supplied does not change regardless of changes in price.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a specific price.