Under Absolute Purchasing-Power Parity

question 22

Multiple Choice

Under absolute purchasing-power parity,

• A)the exchange rate equals 1 if both the countries have equal price indices.
• B)interest-rate parity holds.
• C)relative purchasing-power parity cannot hold.
• D)a currency depreciates relative to another currency by the amount by which the inflation rate is lower in the first country than in the second country.

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Definitions:

Temporary Cessation

A temporary halt or pause in an activity or process, often used in medical contexts.

Breathing

The process of inhaling and exhaling air to facilitate gas exchange within the body.

Tissue Capillaries

The smallest blood vessels in the body, located within the tissues, where gas and nutrient exchange occur.

Oxygen

A chemical element with symbol O and atomic number 8, essential for most life forms on Earth as a critical component of the air we breathe.