Which of the Following Statements Is the Most Accurate

question 5

Multiple Choice

Which of the following statements is the most accurate?

• A) If PPP holds true, then the law of one price holds true for every commodity as long as the reference baskets used to reckon different countries' price levels are the same.
• B) If the law of one price holds true for every commodity, PPP must hold automatically.
• C) If the law of one price holds true for every commodity, PPP must automatically hold as long as the reference baskets used to reckon different countries' price levels are the same.
• D) If the law of one price does not hold true for every commodity, PPP cannot be true as long as the reference baskets used to reckon different countries' price levels are the same.
• E) If PPP holds true, then the law of one price must hold true automatically.

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Definitions:

Leading Export

Refers to the primary goods or services that a country exports the most, making a significant contribution to its economy.

Exports

Merchandise or services transferred for sale or exchange from one country to another.

Imports

Products or services that are imported into a country from overseas to be sold.

Production Possibilities Curves

A graphical representation showing the maximum quantity of goods and services that can be produced within an economy, given fixed resources and technology, when those resources are fully and efficiently utilized.