Let P$ Be the U $\times$ Be the Price of the Same Basket of Goods in Particular

question 132

Multiple Choice

Let P$ be the U.S.dollar price of a basket of particular goods and P $\times$ be the price of the same basket of goods in Japanese yen.The PPP theory predicts that the dollar/yen exchange rate,E_{$/ $\times$} ,should be equivalent to:

• A)(1+P\(\times\))/P$.
• B)(1 + P$)/P\(\times\).
• C)P\(\times\)/P$.
• D)P$/P\(\times\).

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Definitions:

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Mental shortcuts or rules of thumb that simplify decision-making processes but sometimes lead to biased or inaccurate judgments.

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