Purchasing Power Parity (PPP)theory States That

question 69

Multiple Choice

Purchasing Power Parity (PPP) theory states that

• A)the exchange rate between currencies of two countries should be equal to the ratio of the countries' price levels.
• B)as the purchasing power of a currency sharply declines (due to hyperinflation)that currency will depreciate against stable currencies.
• C)the prices of standard commodity baskets in two countries are not related.
• D)the exchange rate between currencies of two countries should be equal to the ratio of the countries' price levels,and as the purchasing power of a currency sharply declines (due to hyperinflation)that currency will depreciate against stable currencies.