If Purchasing Power Parity Holds,the Exchange Rate (E)can Be Expressed

question 7

Multiple Choice

If purchasing power parity holds,the exchange rate (e) can be expressed as a function of the domestic price (P) and the foreign price (P*) as

• A) e = P - P*.
• B) e = P* - P.
• C) e = P* + P.
• D) e = P/P*.

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