Which of the Following Is True About PPP Theory

question 4

Multiple Choice

Which of the following is true about PPP theory?

• A)The theory explains that the change in the exchange rate between two currencies is proportional to the change in the ratio in the two countries' general price levels
• B)The theory explains that the change in the exchange rate between two currencies is greater than the change in the ratio in the two countries' general price levels
• C)The theory explains that the change in the exchange rate between two currencies is less than the change in the ratio in the two countries' general price levels
• D)The theory explains that exchange rates and price levels are unrelated

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