Exchange Rates Will Equalise Purchasing Power Parity in the Long

question 121

Multiple Choice

Exchange rates will equalise purchasing power parity in the long run unless:

• A)all products can be traded internationally.
• B)products do not differ across countries.
• C)countries practise free trade.
• D)countries impose barriers to trade, such as tariffs and quotas.

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Definitions:

Industrial Nations

Industrial Nations are countries with significant levels of industrialization and higher standards of living.

Edward Denison

An American economist known for his work on measuring the sources of economic growth.

Productivity Growth

An increase in the output of goods and services per unit of input, reflecting improvements in efficiency, technology, or processes.

Productivity

A measure of the efficiency of production, often quantified as the amount of output per unit of input.