If,in the Long Run,the Purchasing Power Parity Theory Held True

question 20

Multiple Choice

If,in the long run,the purchasing power parity theory held true for two countries,what would we expect of the exchange rate for each of these two countries?

• A)They would be proportionate to the relative price levels in the two countries.
• B)They would be at par.
• C)They would be unpredictable given the information provided.
• D)They would be gradually decrease.

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Definitions:

Boston Tea Party

A protest by American colonists in 1773 against British taxation, in which they boarded British ships and dumped tea into Boston Harbor.

Patriot Behavior

The actions and attitudes of individuals who intensely support and defend their country, often associated with the American Revolutionaries who fought for independence from Britain.

Continental Association

An agreement adopted by the First Continental Congress in 1774 in response to the British Coercive Acts, implementing a trade boycott with Great Britain.

Committees of Observation

were bodies established by American colonists during the early stages of the Revolutionary War to enforce the boycott of British goods following the Townshend Acts and to spread the cause of liberty.