The Purchasing Power Parity Theory Is Not a Good Explanation

question 75

Multiple Choice

The purchasing power parity theory is not a good explanation of nominal exchange rate determination in the short-run because:

• A) there is no evidence that low inflation is associated with less rapid nominal exchange rate depreciation.
• B) most nominal exchange rates are fixed and foreign exchange markets do not bring the supply and demand for currencies into equilibrium.
• C) most goods and services are traded internationally and are standardized.
• D) many goods and services are not traded internationally and not all internationally-traded goods are standardized.

---

Definitions:

Blood Pressure

The pressure exerted by circulating blood upon the walls of blood vessels, an important indicator of cardiovascular health.

Special Consideration

Adjustments or accommodations made in academic or professional settings for individuals who have unique circumstances or needs.

Korotkoff Sounds

Sounds heard while measuring blood pressure with a sphygmomanometer and stethoscope, used to determine systolic and diastolic pressures.

Cuff Deflated

Refers to the process of releasing air from a cuff, commonly associated with blood pressure measurement devices, to lower its pressure.