If the Purchasing Power Parity Theory Were Literally True

question 20

Multiple Choice

If the purchasing power parity theory were literally true:

• A)we should see some nations devaluing their currencies relative to the U.S.dollar,while other nations revalue their currencies.
• B)the price of a traded good should be the same everywhere in the world.
• C)the price of a Big Mac should be the different everywhere in the world.
• D)the exchange rate should be the same between all the countries.
• E)prices should tend toward equality with exchange rates.