To Express the PPP Theory in Symbols,let P_$ Be the U.S.dollar

question 40

Multiple Choice

To express the PPP theory in symbols,let P_$ be the U.S.dollar price of a basket of particular goods and P_¥ be the price of the same basket of goods in Japanese yen.The (purchasing power parity) PPP theory predicts that the dollar/yen exchange rate,E_$/¥,should be equivalent to _____.

• A) E_$/¥= (1+P_¥)/P_$
• B) E_$/¥= (1 + P_$)/P_¥
• C) E_$/¥= P_¥/P_$
• D) E_$/¥= P_$/P_¥
• E) E_$/¥= (1+P_$)/(1+P_¥)

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