The Purchasing Power Parity Theory Is a Good Predictor Of

question 101

Multiple Choice

The purchasing power parity theory is a good predictor of:

• A)changes in exchange rates between two third world nations.
• B)the long-run relationship between changes in the price level and the exchange rate of two countries.
• C)interest rate differentials between two countries when there are strong barriers preventing trade between the two countries.
• D)how intervention in exchange markets by central banks influences prices in various countries.
• E)the day-to-day relationship between changes in the price level and the exchange rate of two countries.

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