According to the Purchasing Power Parity Theory of Exchange Rates

question 260

Multiple Choice

According to the purchasing power parity theory of exchange rates,

• A)a dollar, when converted to other currencies at the prevailing floating exchange rate, has the same purchasing power in various countries.
• B)in equilibrium, national currencies have equal value in terms of gold.
• C)the higher a nation's price level in terms of its own currency, the greater is the amount of foreign exchange it can obtain for a unit of its currency.
• D)nominal currency values will tend to equalize (become 1 = 1)in the long run.