If the Purchasing Power of a Dollar Is Greater Than

question 204

Multiple Choice

If the purchasing power of a dollar is greater than the purchasing power of the yen,purchasing power parity would predict that

• A)in the short run,exchange rates will move to equalize the purchasing power of the dollar and the yen.
• B)in the long run,exchange rates will move to equalize the purchasing power of the dollar and the yen.
• C)in the long run,interest rates will move to equalize the purchasing power of the dollar and the yen.
• D)in the short run,interest rates will move to equalize the purchasing power of the dollar and the yen.

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Definitions:

Expected Value

A statistical concept that calculates the average outcome when the future includes scenarios that may or may not happen.

Natural Logarithm

A mathematical function denoted as ln(x), representing the time needed to reach a certain level of growth at a constant growth rate of 100%.

Utility Function

A mathematical model that represents consumer preferences by assigning a level of utility, or satisfaction, to different bundles of goods or services.

Probability

An indicator of the probability of an event happening, represented by a value ranging from 0 to 1.