The Theory of Purchasing Power Parity States That Exchange Rates

question 111

Multiple Choice

The theory of purchasing power parity states that exchange rates between any two currencies will adjust to reflect changes in

• A)the trade balances of the two countries.
• B)the current account balances of the two countries.
• C)fiscal policies of the two countries.
• D)the price levels of the two countries.

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Definitions:

Constantinople

The capital city of the Byzantine Empire, known as a strategic and economic hub, later conquered by the Ottomans and renamed Istanbul.

Ottoman Turks

Refers to the people from the Ottoman Empire, a vast and powerful empire that spanned parts of Europe, Africa, and Asia from the late 13th century until its dissolution after World War I.

Gunpowder

A mixture of saltpeter, sulfur, and charcoal, used in the past as a propellant in firearms and as an explosive.

Invented

The act of creating, designing, or originating something that has never been made before.