Under Purchasing Power Parity (PPP), If U

question 52

Multiple Choice

Under purchasing power parity (PPP) , if U.S. monetary growth leads to a long run doubling of the U.S. price level, while Germany's price level remains constant, PPP predicts that the

• A) long-run DM price of the dollar will be doubled.
• B) long-run DM price of the dollar will be halved.
• C) long-run DM price of the dollar will remain the same.
• D) short-run DM price of the dollar will be halved.
• E) short-run DM price of the dollar will be doubled.

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Definitions:

CIF

Cost, Insurance, and Freight, a term used in international trade that indicates the seller is responsible for covering these expenses until the goods reach the purchaser's specified port of destination.

Cost

The value, usually in monetary terms, required to produce, acquire, or maintain a good or service.

Insurance

A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.

Breach of Warranty

A violation of the terms of an express or implied warranty, where the promised standard or quality of a product or service is not met.